Reventon’s top tax time tips
Property prices continue to hit record levels with the value of capital city homes increasing 23.7% in the past year.
Australian Bureau of Statistics (ABS) figures show property values experienced their biggest annual increase in value since it began keeping records in 2003.
It was the smaller capital cities that performed the best in the past year with Hobart recording the highest property price growth of 29.8%, followed by Canberra at 28.8% and Brisbane at 27.8%.
Sydney values increased 26.7%, Adelaide 23.9% and Melbourne 20
It’s no surprise most Australians do everything they can to reduce their tax payable and increase their tax refund. And with Australian tax revenue at $593.2 billion in 2020–21, you can understand why. That’s approximately $23,000 in tax payable for every Australian every year, making up over a quarter (28.7%) of our GDP!
Tax evasion is a crime, but there are many legal ways in which the Australian Government allows you to reduce or redirect your tax payable – and you can use these to your benefit to build wealth. Here’s how…
- Lodge a PAYG Withholding Variation
Did you know you don’t have to wait until the end of the year to get your tax refund?
“The ATO allows you to lodge a Pay As You Go (PAYG) Withholding Variation that directs your employer to withhold less tax, giving you more take-home pay,” says Gary Limardiono, Head of Accounting at Reventon.
“It’s an efficient tax strategy to access your tax refund during the financial year. Your bank calculates interest on your mortgage daily, so this extra cash can reduce your debt or allow you to invest more.”
PAYG Withholding Variation is particularly useful if you have negatively geared investment properties as it significantly increases cash flow.
While you must ensure you accurately estimate your variation, Gary says there are a few other downsides to this popular tax minimisation strategy.
“That said, it’s always best to speak with your accountant or a tax professional before making a decision about whether this is the right strategy for you,” he says.
- Manage and save your supporting documents
In 2021, the ATO announced its decision to direct $111 million to hunt down Australians who overclaim on work expenses, including not paying correct tax on rental properties and investments.
“This means it’s increasingly more important to manage and save supporting documents for your tax claims,” says Gary. But it’s equally as important to ensure you’re not missing out on savings or making voluntary donations to the taxman.
“It’s also critical to understanding your financial situation – the first thing banks review if you’re looking to buy a property or build your investment portfolio.”
So there are many benefits to maintaining good records, but what supporting documents should you keep?
“The documents you need to keep depend on the deductions you want to claim,” says Gary. For mobile phone, internet, travel and work-related clothing or education, you should keep tax invoices, receipts, bank statements or screenshots of your bank transactions.
“If you’re claiming the use of your car, you’ll need to keep all of the above for fuel or maintenance and car expenses plus a logbook.”
Gary says you should also keep records of purchases for:
- Tools, computers and home office furniture (for anything over $300)
- Donations and accounting fees
- Business financials and tax return costs (for anything over $800)
- Investment property expenses
- Investment in shares, Forex (Foreign Exchange) and crypto
- Plan ahead
Gary says the simplest way to reduce your tax payable is to pay yourself first. This means salary sacrificing to your superannuation.
“Tax in your superannuation is a flat rate of 15 per cent,” he says. “For a single person with no dependents earning $65,000, tax payable is 19.63 per cent ($12,762). By sacrificing $9,000 to super, you can instantly save a minimum of four per cent.”
Another simple way to reduce your tax is having health insurance.
“This gives you maximum benefit on health expenses and reduces your Medicare levy surcharge,” says Gary.
How can a tax professional save you more money?
Gary says while online platforms make it easier to manage your finances throughout the year, when it comes to tax time, you need a professional.
“At Reventon, we can help you structure your business or income accounting to minimise your tax payable, including establishing partnerships, companies or trusts” he continues.
“We can also help prepare the depreciation report on your investment property, business activity statements and instalment activity statements, as well as maximise your fringe benefits.
“Engaging an accountant or a tax professional is a personal decision and depends on your individual circumstances and financial situation. But often, as your property portfolio and wealth grow, so too does the complexity of your tax responsibilities. And that’s where we can help.”
If you’re interested in how Reventon can help you save at tax time or if you’ve just realised you have overdue tax returns, contact us today.
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