Tips For Tax Time

With the 30th June fast approaching it'll soon be the end of the financial year.

It’s time to put your house into order and get ready for the annual tax return. Here are three tips to help you.

As June 30th comes and goes, everyone spends at least a little time thinking about that most complex of subjects – tax.

For many of us it is a big turn-off, but it is important to get it right – so that we maximise our income but at the same time stay the right side of the law.

Here are three tips to help you.

1. Use a tax agent

One of the ways to assist in getting your tax return right is to work with a tax agent.

All tax agents must be registered with the Tax Agents’ Board (www.tabd.gov.au), and must follow strict regulations that ensure they act in a professional manner.

They should have a good understanding of tax law and be able to advise you on declaring income and claiming only valid expenses. For more complex tax returns, having a tax agent who is also a qualified accountant may help.

Remember, though, that you are responsible for all the information on your tax return even if a tax agent completes it for you. This means that you will be responsible for any extra tax if your agent has made a mistake.

Another benefit of using a tax agent is being able to delay lodging a return. This is a great benefit if you are likely to end up receiving a tax bill from the ATO, as it will buy you some extra time.

A tax agent can lodge your 2009 tax return as late as 15 May 2010, compared to 31 October 2009 if you lodge it direct. Remember the ATO won’t send you a tax bill until they've received and assessed your tax return.

There’s just one thing to remember with this - if this year is the first time you use a tax agent, make sure you visit them prior to 31 October 2009 and agree with them that they will be lodging on your behalf.

2. Remember the tax man is smart

Thanks to modern technology, the tax office expects to match income details with third-party data on more than 48 million transactions, including interest payments, dividends and managed fund distributions, to identify undeclared income.

Missing even a small sum could put you among the 250,000 Australians to receive a "friendly reminder".

Also, by tapping into the databases of land titles offices, managed funds and even the Australian Stock Exchange, the tax man can identify who sold an investment and when.

It is therefore essential to include details of any capital gains made during the year, another area the tax office has cracked down on in recent years.

Note that while capital gains are added to your total taxable income, capital losses can only be offset against capital gains, not against your regular income. However, they can be carried forward to future years.

3. Get organised

The key to minimising income tax lies in prior planning and being organised. There are some things you can do prior to the end of the financial year which will help minimise your tax liability, but also there’s probably areas where you know you haven’t maximised your refund. Here’s a few area to think about:

• Do you keep all relevant receipts? Many people don’t, and so miss out. Examples include medical receipts and self-education expenses.

• Do you salary sacrifice into super? Anyone who is less than 50 years old can contribute up to $50,000 per year, rising to $100,000 for people over 50 years. Contributions are only taxed at 15% rather than your marginal tax rate.

• Are you maximising the expenses on your investment property? Are you claiming depreciation on the construction cost? And what about repairs, maintenance and banking costs? If this is a complicated area for you, consider using a specialist company to help you do the calculations.