Four essentials to prepare for tax time
It’s that time of year where many Australians start to lodge Tax returns with the ATO. Here’s what you may need to know.
1. Check if you need to lodge
Most Australians need to lodge a tax return each year, but there are some exceptions. To see if you need to lodge a tax return, you can check using the ATO tool here.
Examples of some of the exceptions include you did not work or run a business during the year, or your only source of income was an exempt Australian Government payment.
Note that different tax years have different requirements, so it is always recommended that you check.
2. Keep your records
Good record keeping may be annoying to do throughout the year, but it can help prepare you for tax time.
Good record keeping means keeping your income records, your receipts and bank statements, record of investments, private health insurance and if you have property, keeping track of the rental income and expenses.
Of course, there are more to the list but by bearing those in mind you will be a long way to being fully prepared come tax time.
Why do you need to keep receipts and bank statements?
Bank statements are proof of payment while the receipt proves the nature of the payment. An example would be you do your grocery shopping where you also bought some stationery for your work/business. The bank statement will show the total amount paid while the receipt will show which items are deductible (i.e., the stationery) versus those that are non-deductible (your groceries).
TIP – keep receipts for everything. Photos/digital copies are fine and help not having to shuffle too much paper. By doing this, you can hopefully avoid missing a legitimate deduction.
3. Identify all possible deductions
The broad rule of thumb is that expenses paid that relate to the income earning activity are deductible. Obviously, there are some exceptions, but the broad rule is a good starting point.
Car expenses, home office/studio, materials and supplies, phone and internet, union dues, study that you need to maintain your role or get a promotion/increase your income, uniforms and protective clothing and equipment are reasonably standard examples.
Think about your work/business and what other items are industry specific that may apply. For example, a dance teacher could deduct their ballet shoes, music purchased for classes, materials purchased for performances etc. Rideshare drivers can claim cleaning of the vehicle used for rideshare, charging cables for phones/devices they can then offer to clients, bottled water for clients, etc.
4. Decide how you are going to lodge
Deciding how you are going to lodge should be carefully considered as it can affect the amount of tax you pay, resulting in a smaller refund or higher tax bill.
Things to consider:
- Are you confident of your situation and how tax applies to it?
- Is yours a simple return?
- You are confident but would like additional review to make sure you are not doing the wrong thing?
- You are not confident at all because you do not fully understand how tax returns work, or you have personal tax complexities such as multiple investments, a business, capital gains, rental properties?
Once you have considered these things you can choose your preferred option which is normally one of three:
- Lodge yourself via MyGov – this is generally for those with quite simple returns and are confident with their financial situation, tax returns and number.
- Lodge via a low-cost Tax Agent that provides a review, preparation, and lodgement service. These services provide assurance that you are not making large errors and help put together the return in the proper way.
- Lodge via a Tax Agent that provides a broader comprehensive approach, working with things in detail with you based on your individual situation, providing advice on possible deductions, tax planning, improving how you keep records etc. Prices will vary so you would need to research carefully.
All three options provide different risks, costs, and benefits. Only you can make that decision.
Note that each of these options are only as good as the information you as the taxpayer, are responsible for and can provide.
Raiz has collaborated with Nixer this tax time
Raiz has collaborated with Nixer, an innovative and simple online tax agent to help Raiz users complete tax returns in hopefully less than 10 minutes.
Nixer will give a $10 discount on your tax return ($79 down from $89) and invest a $5 reward into your Raiz account.
*Prices and reward correct as of July 2024
The Nixer Team are ready to help you prepare and lodge your tax return.
To see Raiz fees, click here.
To see if Raiz is suitable for you, please read the PDS.
By Peter Bayliss Nixer
Updated: 23 July 2024
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