2008/09 Financial Year Tax Tips

The following tax tips are only guidelines. Here are some main points you need to consider, while not exhaustive, when you are preparing your income tax returns for the 2008/09 financial year:

Eligible home office expenses – When part of home has been set aside primarily or exclusively for purpose of doing work from home, costs such as heating, cooling, lighting and depreciating office equipment or professional library may be allowable. To claim deduction you must kept a diary for at least 4 weeks of the hours you worked at home. However, no deduction is available for occupancy expenses such as mortgage interest, rent, insurance and rates unless you conduct a business from home.

Rental properties – List all rental property deductions. Rental property owners can generally claim deductions for advertising, bank charges, body corporate fees, cleaning, council rates, electricity and gas, gardening, insurance, interest on loans, land tax, lease preparation expenses, pest control, postage and stationery, property agent fees, repairs, secretarial and bookkeeping fees, security patrol fees, telephone calls and water rates. You may also be able to write off the cost of certain building depreciating assets and borrowing costs over time.

Dividends and interest - To ensure that interest and dividends are correctly declared by taxpayers, the Tax Office matches information provided in tax returns with information from external sources. The best way to avoid trouble here is to include all such income in your return and retain supporting documents such as bank and company dividend statements.

Utilise capital losses – In the current economic downturn many investors may have incurred capital losses from disposal of investments. Any such loss can be offset against any current capital gains you may have made, or be carried forward indefinitely to be applied against any future capital gains.

Salary packaging and fringe benefits - This can be a useful way to obtain some tax savings, particularly if you are on the top marginal tax rate and your employer offers it.

Rebates - Tax rebates or offsets can reduce your tax bill, so it pays to know what you are entitled to. Long-standing examples of tax offsets include the dependent spouse rebate, low-income rebate, mature aged worker rebate, the senior Australian tax offset, the medical expenses offset, the private health insurance offset and the offset for superannuation contributions made on behalf of a low income spouse. Additionally there is a 25% entrepreneur’s tax offset for small business. An education tax offset is available for claim in 08/09 financial year.

Claim all work-related deductions – Make sure you spend time collate all the required tax invoices. This can save you considerable cost. Also claim all non-work related deductions, such as a registered tax agent fee and ongoing management fees paid to a financial planner where the advice relates to income producing assets. Bank charges and any interest payments on funds to finance the purchase of shares and other income producing investments are generally allowable.

Bad debts - Consider writing off any bad debts prior to year end.

Review your assets – Temporary investment allowance break for an additional tax deduction of 50% of depreciating assets costing more than $1,000 acquired by a small business from 13/12/08 to 30/6/09.

Avoid excess superannuation contributions tax – A self-employed taxpayer will be able to claim their contributions to a complying superannuation fund as fully tax deductible up to the age of 75. Any excess contributions made by the self-employed or by an employer in respect of an employee will be taxed at a rate of 46.5% rather than 15% if the contributions made during the year exceed $50,000 for those aged 50 or more and $25,000 for those aged under 50.

Tax debt - Many clients are facing difficulties due to the current economic climate. Key point is, do not delay lodgement because you can’t pay on time. Once you’ve lodged, you will need to contact ATO about any difficulty in paying. The commissioner has implemented to assist small businesses struggling to meet their payment obligations as a result of the economic downturn such as 12 month GIC free payment arrangements, deferral of the payment due date on BAS liabilities and releasing taxpayers from certain tax debts due to hardship.