For many Australians, tax time can bring a high level of stress. You can avoid that and even come out ahead if you begin preparing for it well before it happens. In this post, we'll share some tips to help you do just that.
Be sure to collect all the necessary papers well before the tax filing deadline. Some of the most important ones are your payment summaries or income statements, or—even better—the non-negotiable checks issued by your employer. And don’t forget the basic receipts. Receipts for any deductible expenses should go into that same file, whether they’re for a home office, self-employed, or medical services for which you’re going to claim a deduction.
Speaking of might, let’s move on to guesswork.
Understand Your Deductions and Offsets
It's important to acquaint yourself with common deductions and offsets. By doing so, you can make the most of every opportunity to save. Some of the major deductions and offsets that tend to come up for a lot of people are work-related expenses, donations to charity, medical expenses, interest deductions for investment loans, the private health insurance rebate, and the low and middle income tax offset. However, you need to make sure you're following the ATO's rules for claiming these. That's not something you want to get wrong.
The process is much simpler with tax software. While you still have to do the math, mostly you just answer questions. The software automatically fills in the return and allows you to e-file when finished. If the tax software is up to date and you follow the step-by-step instructions, few errors are likely to occur.
Review Changes in Tax Laws
It is vital to keep current with any potential changes to tax laws. Tax laws alter often, and they can have a substantial effect on how much money you end up giving to the government. What's more, changes in the law—tax rates or when a particular kind of payment is eligible for a deduction on your return—can alter your liability in a way that you might not have anticipated. The Tax Office is always the first to know when changes are made. The easiest (and most trustworthy) way to keep notified is to check out the ATO website from time to time.
Plan for PAYG Instalments if Self-Employed
If you happen to be an independent worker or someone who makes a large portion of their income on a non-salary basis, then it's quite possible you have been directed by the Australian Taxation Office (ATO) to make PAYG (Pay As You Go) instalment payments. The better you keep up with these payments, the less likely it will be that the Tax Office will come after you for the sum even after you file your tax return.
Double-Check Your Return Before Filing
After completing your tax form, you should look it over to make sure it doesn't contain any mistakes or missing information. Some of the most common errors result from the use of wrong Social Security Numbers (SSNs), from poor math (including addition and subtraction mistakes), or from forgotten details (such as the absence of your signature). Double-check now to save time and hassle later.
It is useful to keep copies of your tax return and the added documents for at least five years. This will come in handy if you're ever audited or if you need to fix something on a past return.
Conclusion
Tax season can seem like a monumental task, but it doesn't have to. You can make it easier by keeping your ducks in a row, getting a handle on what you can deduct or use as an offset for your tax bill, perhaps buying some tax software or hiring a professional, and, above all else, keeping yourself informed. Tax laws do change from year to year, and what was okay to claim last year may not be okay this year. Plus, there are always new areas where taxpayers can save, so it's just being smart to stay up on current tax law.