The tax rules change just about every year so planning early can result in thousands of dollars of savings when tax time arrives.
June 30 seems a very long time into the future but it will be here before you know it. Tax rules change constantly so if you leave it until the end of the financial year to plan your deductions it can be too late and you can miss out on thousands of dollars in tax savings.
Here are five potential tax savings that it’s worth doing some preparation to make sure you’re entitled to for the 2011-12 financial year.
1. Telco expenses
If you use your iphone, ipad or wireless internet for work purposes, you can claim that part of your bill as a work-related deduction. You’ll need to keep a record of the calls you make or the time spent on the net for work but if you do, the savings can be significant.
$79 per month mobile phone plan
30% of calls work related for 11 months of year
$79 x 30% x 11 = $260.70
$49.95 home broadband pla.
15% of use work-related
$49.95 x 15% x 11 = $82.42
TOTAL TAX DEDUCTION: $343
2. Work-related equipment
Find out exactly what you can claim for. Tradies can claim the cost of tools. If you work in finance you might need a briefcase, laptop, iPad or camera. You can claim a deduction for the full purchase price of each tool or piece of equipment you buy for work that costs $300 or less. If it costs more than $300 you’ll have to claim its cost over time.
You buy a laptop for $1,500 on 1 october so you have it for 273 out of 366 days (it’s a leap year). A laptop has an effective life of three years so using the ‘prime cost method’ you can claim 33.3% of its cost per year:
$1,500 x 273/366 days x 33.3% = $374
TOTAL TAX DEDUCTION: $374
3. Income protection insurance
Premiums can be claimed as a tax deduction, provided the cover is not part of your super. Purchase your policy now so you can claim it for this financial year.
The cost of your policy will depend on your age, gender, occupation and whether or not you’re a smoker.
TOTAL TAX DEDUCTION: $650
If you own shares, managed funds or investment properties, the majority of related expenses, including interest paid on loans
, can be claimed at tax time
You own an investment property and pay annual mortgage interest of $30,000, rates of $2,400 per year, property management fees of $1,750 and insurance of $450. Your total expenses are $34,600. Your rental income is $350 per week or $18,200 per year. Your loss is therefore $16,400, all of which you can claim as a deduction
TOTAL TAX DEDUCTION: $16,400
5. Home office costs
You can claim the work-related part of utility bills such as electricity and gas, for the decline in value of office furniture and fittings. Depending on the size of your work related space as a proportion of the overall floor space of your house you can also claim a portion of rent, mortgage interest and rates.
If you work from home 45 hours per week, 48 weeks per year, this equates to 2,160 hours. Using the ATO’s fixed rate of 26 cents per hour for utilities, your tax deduction is $562.
Assuming your home office accounts for 15% of your property’s total floor space and you pay $600 per week in rent or other occupancy costs, you can also claim $90 per week for 48 weeks or $4,320.
TOTAL TAX DEDUCTION: $4,882.
-- By Jackie Pearson
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan