Six Tips To Maximise Your Tax Refund For Individuals

August 5, 2020    taxreturnperth

As a taxpayer, there are some proven ways to minimise your tax liabilities: both through investment activities and benefits, and by legitimately organising your financial affairs.

Some of these strategies for salaried workers and the self-employed, include:

The Use of Discretionary Trusts For Investments

A discretionary trust is an excellent vehicle for families as it helps stream income to family members who may be on lower tax brackets. For example, if you hold shares in a discretionary trust, you can stream dividend income and capital gains to for example, your spouse, who may be on a much lower income bracket. You can also distribute the income differently each year by using a trust

Salary Sacrificing Your Superannuation

Superannuation contributions are taxed concessionally at 15 percent per annum in your super fund, with a maximum contribution of $25,000 each year. Therefore, if your 9.5 percent mandatory super contribution is less than $25,000, you can contribute the difference to your super by way of salary sacrifice. This way, if your marginal tax rate says, 35 percent, you will save 20 percent tax on your sacrifice’s super amount

Work-related car expenses

If you use your own vehicle for work, you can claim deductions for certain business expenses: either by using a ‘cents per km’ rate prescribed by the ATO, or claiming the actual expenses incurred by maintaining a logbook of business use for 12 weeks.

In more detail, this means:

Cents per km’ method:

You can claim a flat 69 cents per km on work-related travel subject to a cap of 5000 km, giving you a maximum deduction of $3,450 per car. You may still need to maintain a diary or substantiate how you worked out the number of kilometers for business

The logbook method:

You can claim a business-use percentage on all allowable expenses related to the car, such as petrol, oil, repairs, registration, insurance, interest, lease payments, depreciation, and maintenance. However, you need to maintain a logbook for a continuous 12-week period to establish a business-use percentage. The logbook is usually good for five years, and this method can often provide a higher deduction, particularly if you drive a luxury car.

Salary Sacrificing Your Vehicle

If you use your personal vehicle for work purposes, you can request your employer to salary sacrifice it instead of claiming a deduction for vehicle expenses in your tax return. This can prove beneficial since it allows you to make use of the standard 20 percent rate, instead of maintaining a logbook. This method is particularly suitable for employees on higher pay scales – and/or those with a high percentage of personal vehicle use. Always consult your accountant or novated lease company when considering this strategy

Self-education Expenses

You can claim any education expenses incurred in excess of $250 that are directly related to your work or income-generating activities. However, these expenses must be incidental to your current work, and:

  • Enable you to improve or maintain the skills or knowledge necessary to maintain your current income earning activities, or
  • Be likely to result in increased earnings in the future.

You cannot claim a deduction if your education results in you changing professions, or generating a new source of income.

Maximising The Deductions on Your Investment Property

Owning a rental property can significantly reduce your tax and boost your refund. When investing in property, there are two main tax deductions available: mortgage interest, and depreciation on building and appliances. By maximising these two deductions (particularly depreciation), you may be able to report a tax loss on the property. This tax loss can be offset against your salary and other income, saving significant tax dollars; particularly if you are in a higher tax bracket. Remember, always speak to an experienced property accountant for personalised advice.

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All our tax accountants are CPA qualified so please contact Tax Return Perth now for a free consultation and to discuss your situation.

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