For some people TAX TIME is a time of fear or anxiety. But for many, tax time is a once-a-year cash grab – the annual TAX REFUND.
People get refunds for all sorts of reasons – didn’t work the full year, sizable tax deductions relating to work activities and for many, the annual Family Tax Benefit (FTB) top-up based on the annual income submitted with the tax return.
From my (nearly) thirty years experience, what ever the reason for the tax refund, I find clients are having their tax returns prepared earlier each year in order to access the cash from their tax refund.
I also know from the pattern of usage of our online sites that clients start searching for tax tips as early as May, increasing through June and exploding in July.
So, here are some tips to help with your tax refund 2011:
1. Know your industry
Knowing your industry and what you can claim as a tax deduction can result in substantial tax deductions, which flows onto a tax refund.
For example, many workers receive a “meal allowance” of $12, paid as a result of working a certain number of overtime hours. Not all of those workers are aware they are able to claim a deduction of $24.95 (eligible amount for 2010 tax year) against that allowance. If a large number of overtime hours are worked throughout the year, that can amount to a substantial deduction.
We have included details of allowable deductions for 32 occupations on our website – check it out here:
2. Tax Offsets
There are a number of tax offsets that taxpayers may be entitled to. Some are automatically allocated/calculated by the ATO (eg. Low Income Tax Offset, Beneficiary Tax Offset) and some must be identified on the tax return.
Here is a little list of common Tax Offsets that may apply to you:
- Education Tax Refund - for 2012 is still limited to computers, internet, books and stationery. Addiitional items allowed for the 2012 financial year;
- Medical Expenses – threshold has been raised this year from $1500 to $2000. The rebate of 20% applies to the excess over that limit;
- Spouse (phasing out announced in the 2011 Budget) – eligibility requires non-receipt of FTB and is income tested;
- Senior Australian – must receive Age pension or Service pension to be eligible;
- Pensioner – some Centrelink recipients (like Parenting Payment Single or Carers Pension) are entitled and is income tested;
- Private Health Insurance – where policy holder does not receive the governments 30% rebate as a reduction in premiums;
- Zone or Overseas Forces – applies if you lived or served in certain locations throughout the year. Some conditions apply.
Whilst there are other Tax Offsets available, these are the most common for working Australians.
There are opportunities for people to prepay tax-deductible expenses before July 1. One of the biggest is interest on investment loans.
This may be useful if you are a property investor and share market investor and you borrow money on margin loans or home equity loans to fund the investment.
If this applies to you you can find some information on this topic in my ebook on taxation and property explained.
4. Timing of transactions and events
If you own property or shares and are considering selling, timing and planning can make a big difference. For example, if CGT assets are held longer than one ear there is a 50% discount on a CGT profit. Another issue relating to property is that CGT is calculated on date of contracts – not date of settlement.
So holding assets to optimise CGT discounts or deferring a transaction, where possible, can save tax.
5. Superannuation and SMSF
Superannuation and Self Managed Superannuation Funds (SMSF) is an area where all taxpayers, whether a wager earner or self employed, can obtain substantial tax savings.
Some years ago I had one client who saved almost $80,000 tax per year. Granted, not all taxpayers profiles will achieve that kind of tax savings, but suffice to say that many of them can make significant tax savings.
However, taxpayers need to get the right advice from the right people with the right strategies. I believe tax advice, together with investment planning advice from our preferred financial advisor, can achieve success for all our clients – YES, unless you DIY a SMSF (which I wouldn’t recommend) you do need a financial planner.
6. Super for you Spouse
Not many taxpayers are aware that a tax offset of $540 (tax credit) is available if they make a super contribution on behalf of their spouse if the spouse earns less than $13,800 (below age 65).
7. Debt Recycling
Debt recycling is a long-term strategy but, depending on circumstances, can result in major tax savings.
Debt recycling involves converting non-deductible debt to deductible debt – for example, your personal or mortgage debt into investment debt. An example would be selling shares held by you without borrowing attached, using the funds to reduce the home mortgage, then using the equity in the home via a separate investment loan to buy shares using borrowed funds.
8. THERE'S MORE!
There are many more tax deductions and tax offsets that may apply to individuals so obtaining the right information and advice can impact directly on your 2011 tax refund.
That’s why we built and recommend using our online tax app. It provides a comprehensive tax calculation for most working Australians and, for a small fee, we look after the preparation and lodgement of your 2011 tax return.
We would live to help you get the best possible tax refund. Give it a try. It’s FREE to get started: