If you are wanting to pay less tax, following a number of very important but very simple record keeping habits could make tax time easier each year and a number of different areas in your life a lot less stress free.
Recently the Australian Tax Office (ATO) has begun to crackdown more intensely on tax deductions, this means that the importance of following good recording keeping is more important than ever. The ATO has employed thousands of staff and their job is to collect taxes and catch people who can’t prove their deduction claims.
Furthermore, if you simply forget about things you have paid for which could be tax deductible, you are pretty much losing and throwing money away.
Australians lose millions in unclaimed tax deductions every year. It is crucial to make sure you are not one of these individuals.
Furthermore, if at tax time any of your claims are questioned by the ATO, if you have properly saved receipts, you will be 100% ready and in the clear.
It’s simple, if you keep up to date records that you can claim all the tax deductions you’re entitled to you will never pay too much tax than what you are required to pay.
On top of this, you will need to have a clear outline of your income and expenses is the first thing you’ll need to supply if you need financial advice, purchase a property, refinance or increase insurances. Good record keeping doesn’t just make tax time easier, it also keeps many other areas of your life in manageable order.
When it comes to record keeping, what do you actually need?
The following is an extensive list of items and for most people only a few items will apply to you, so don’t be daunted. However, ensure you’re familiar with all the different types of tax-deductible expenses so you know what records to keep for these expenses if you have them in the future.
• Managed funds
• Rent from rental properties
• Income from letting a room
Furthermore, your employer, real estate agent or managed fund should provide you with an annual statement which summarises your earnings over the past financial year.
Next you will need to record all your tax-deductible expenses to bump up your tax refund
• Tax agent fees including your tax return preparation
• Income Protection costs
• Charity Donations
• Private health cover – your private health fund will send you an annual statement, or you can ring and ask them, or check at their website if you have a login.
General work-related expenses
• Professional membership fees
• License/certificate fees
• Union Fees
• Course fees including text books
• Related travel costs
• Accommodation and meals when required to stay away from home
• Professional libraries and work-related magazines
Work related equipment purchase or lease
• Calculators and electronic organisers
• Computer related consumables
• Laptops and computers
• iPads and similar small electronic equipment
• Phone, mobile and phone accessories
• Briefcases and carry-bags
• Sunglasses – if you work outside
• Safety equipment – for example; sunscreen, hard hats, safety glasses and harnesses
• Technical instruments
• Tools of your trade
It is important to note that purchases over $300 you will need to claim a deduction for their decline in value formerly known as depreciation over a longer period rather than claiming the purchase price in full on your next return.
Work related travel
• Personal car or vehicle costs
• Parking Fees
• Public transport fares
• General travel expenses, including flights, taxis etc.
• Accommodation and meals - if you are required to work away from home overnight
Home office expenses
• Desks chairs and other office furnishings
• Office equipment
• Home Office running costs – such as; internet usage and electricity
Clothing purchase and maintenance
• Protect clothing
• Uniforms with a logo
• Laundry of work uniform and protective clothing
Other items that should to be recorded to help increase your tax deductions
• Newly acquired assets such as rental property
• Expenses records for rental properties and other investments
• Records of recently disposed or sold assets
• Expense records related to any disability aids, attendant care or aged care
How long should you keep tax receipts?
The ATO suggests that taxpayers keep their receipts for 5 years if you
• Claimed a deduction for decline in value (formerly called depreciation) - you need to keep the records of these for five years after the date of your last claim for decline in value.
• Acquire or dispose of an asset - you should keep this documentation until five years after no capital gains tax (CGT) is required – you will need this information to work out a capital gain or loss.
• Are in dispute with the ATO - you should keep these records for five years from the date the dispute is finalised.
For most other tax payers who have simple tax affairs, you should keep records for at least a minimum of two years.