How to legally maximise your tax deductions
As an Australian resident for tax purposes you are liable to pay an income tax on your taxable income which is calculated by subtracting allowable deductions from assessable income. The greater the deductions that you can claim, the smaller will be the taxable income and, consequently, you pay less tax. Understanding what deductions are allowed is crucial to minimise your tax liability.
Claim a tax deduction for every expense you are legally entitled to
Many taxpayers do not understand the basics of the tax system and are quite overwhelmed by the regulations related to taxation law. To minimise your tax bill you should recognise amounts that are deductible, record those amounts and claim deductions to which you are entitled.
You are entitled to claim deductions for some expenses that are directly related to earning your income. The expense must not be a private, domestic or capital nature; or to earn exempt income; or where legislation specifically denies a deduction (eg. penalties or fines). If the expense was both work-related and private or domestic, you can only claim a deduction for the work-related portion.
If you are an employee you can claim the deductions that are generally be expected to take place in carrying out the duties of employment. For example, subscriptions to trade, business and professional associations; expenditure on compulsory uniform; cost of cleaning and maintaining clothing used in employment etc. However, you cannot claim a deduction for expenses you incur if those expenses are reimbursed to you by your employer. If you receive income from a rental property you are able to claim landlord expenses such as council and water rates; interest on money borrowed to purchase the property; repairs and maintenance costs etc. Where you receive income from business you can claim expenses that have direct connection to your assessable income.
Good record keeping
Keep all your receipts including for small purchases. A $5 donation to charity or a $10 expense on a stationery item might not seem like a big amount, but each of these small purchases can add up to hundreds of dollars over a 12 month period. Even if you are unsure whether you can claim a certain expense, keep your receipts anyway. A tax accountant at The Quinn Group will let you know if you are entitled to claim it as a tax deduction.
A diary or an app could be a great way to keep track of all your work related expenses.
Seek professional advice
Getting early advice or direct assistance with your tax affairs could help to avoid unexpected tax bill or making mistakes. Remember, tax agents are not all the same. Here at The Quinn Group your tax return will be prepared by a qualified accountant who will look at strategies to legally reduce your tax liability and you are welcome to discuss.