Your here for the list, not an intro, so let's get straight into it - 10 tax tips you can use any time of the year;
You’d be surprised the number of times we’ve heard “but we don’t have the receipts”. C’mon people it’s 2020. Whip out your phone, take a photo of them. Recycle the paper.
You can’t claim the deductions unless you can substantiate it and no, a bank statement/eftpos receipt doesn’t cut it. It needs to be a tax invoice/receipt.
Level up and create a folder in your phone/Google Drive/Dropbox/Box called “Tax 2020” move said photos to that folder. Receipts done.
If you're in business you'll need something a bit more sophisticated than that, so check out Hubdoc. They were recently acquired by Xero - so I'm putting my money on this rather than receipt bank. Either way, they handle the receipt/invoice storage AND pre-fill details on the transactions in Xero, quickbooks etc. So not only do you have the receipts auto attached to the transaction in the software, but it reads the picture/PDF of the invoice, extracts the data and automagically enters that data into your accounting software. Sorcery!
Ok this one requires a bit of preparation and you need to careful about what you salary sacrifice. Your car can be a good one so can your phone, laptop/tablet that you use for work. It’s better than claiming a deduction because of the GST. I don’t have time to explain the calculations on this one so you’re just going to have to trust me. This is honestly one of my favourite tax tips in terms of bang for buck.
Work from home? Have dedicated room for that purpose? No, the kitchen bench doesn’t cut it. There are different rules if your house is the principal place of business (e.g you run a hair salon from home) or if you just do a few hours at night/weekend there (e.g an accountant doing overtime to get the billables up).
If you run the business from home, you can claim rent/interest on the mortgage – BUT that has a sting in the tail when you go to sell. Part of any gain you make becomes taxable. That could hurt, so do your calculations to see if it’s worth it for you.
Talk to your accountant
I mean, before you do stuff. Like thinking of having a “strategy day” for your staff. That may or may not be deductible or have Fringe Benefit Tax implications, so talk to an adviser before you book that junket “strategy day”.
Get the right structure
Individual tax rates are up to 47% including Medicare Levy versus small business in a company – 27.5%. Let me do the math for you. That’s 19.5% difference. So if you’ve got a business in a trust, partnership of individuals or as a sole trader and you’re making decent coin, and you want to reinvest the profits back into the business to grow it, your cash flow issues are compounded by the wrong structure. With the small business restructure rollover you might be able to sort this out before you give the ATO another tip.
Speaking of tips we are half way done. 5 tax tips to go!
As a business owner you probably stay back and work overtime a bit right? And unless you’re on one of those fast till I pass out diets, you’ll need to eat right? Did you know the business can pay for your meals during overtime and there’s no Fringe Benefits issues, the business gets a tax deduction and GST credit for it? Better than using your own funds right? The amount you can claim is a bit convoluted depending on which city/location you’re in, and how much you earn, so it’s best to talk to an accountant like us.
Although Motor Vehicle expenses are hot on the ATO radar, they are still a legitimate deduction. If you can show you’ve used it and followed the rules with the substantiation requirements you have nothing to fear. So, every time you get in the GoGo mobile you could be saving on your payments to the ATO. And as mentioned in Number 2 Salary sacrifice of your car can be the best thing you’ve done in a while.
Got a lot of travel to do for work early next financial year?
Car needs tyres? Got an offer to prepay next years interest? If you put these on the 55 day interest free credit card in June, all of these will save tax in the current year – you’re basically bringing next year's tax saving into this one, so be prepared that the music stops on the prepayment strategy, in the year you stop pre-paying.
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We can’t tell you to put money into super – and we’re not, we’re also not telling you not too.
Just that we can’t tell you either way. BUT what we can tell you is the tax effects of making a contribution and now you don’t have to satisfy a silly 10% income test, you can make deductible personal contributions (called concessional contributions) whenever you like (up to the limits) without having to get it salary sacrificed.
If you’re paying 30% tax, you’ll save $300 in tax personally on every $1,000 you contribute as a concessional contribution. The super fund will pay 15% tax on that $1,000 meaning your net wealth/tax position (personal + super) will be $150 (or 15%) better off. So, if you want to save for your retirement and get the ATO to help foot the bill, speak to a financial adviser – they can tell you to make a contribution or not.
Protect Your Income
Yes, this will save tax as the premium is a tax deduction, but more importantly it will save a lot more if you ever need to claim on it, keep up the mortgage payments, buy groceries – you know the luxury items. And no, you don’t have to be injured at work to claim on this. But you do need to read the fine print – and speak with a financial adviser qualified to advise in insurance to determine if this is right for you.
So there you have it, 10 tax tips you can start using right now.
Need help? Give us a shout.