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Tax Facts

Tax Facts

We thought the following information on various tax issues would be useful to you. Personal circumstances always vary, so please ensure you contact us for specific advice.

(Now the Tax office loves to move their pages around so if you find a link that is not working, we apologise,  feel free to let us know and we will get it up and running again ASAP!)

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Tax FAQ

Tax FAQs

Some individuals don’t have to lodge a tax return it depends on your situation which can differ due to age, income and expenses. Your best option is to come in and have a chat with a Power2 Tax Consultant to get their view on whether or not you need to lodge a return.

At Power2 we lodge your return electronically within 24 hours of completion.

The ATO reports that most electronically submitted lodgments take around two weeks to process, however some lodgments require manual processing and may take up to a month to issue.

While you are welcome to contact Power2, the quickest and easiest way to check the progress of your tax is by using one of the ATO’s online search options.

If you are missing one or more of your Payment Summaries your best option is to contact that employer to see if you can get another one. In the case your employer cannot supply a group certificate speak to Power2 and we will assist.  By far the best solution is to always keep all payment summaries, even if you’ve only worked in a job for a couple of weeks.

In most cases, fees can be taken from your refund. – Once the refund is released by the tax office your payment is deducted and the balance is forwarded to your bank account.  Please be aware that there is an additional administration fee of $40 added to the fee from refund returns.

Power2 can prepare and lodge as many previous years returns as necessary. If you have several years tax returns to be done please let us know at the time of booking so we can allocate the correct amount of time for the returns.

If you leave it too late and miss the deadline then you may receive a fine or interest penalty charge from the ATO.  At Power2 we have lodgement extension facilities which can minimise these charges and, as a Power2 client, you will benefit from this with extended dates to get your tax return completed.

You cannot just claim $300. You must actually incur any expense before it is claimable. Whilst, in some instances, you may not need receipts for expenditure up to $300 you must have spent the money and it must be relevant to your employment.

You are able to claim expenditure incurred in replacing, ensuring and repairing tools of the trade that you use for earning your income. If the cost of any item is more than $300 then it will have to be depreciated (i.e. claimed over its effective life). The amount you can claim will depend on what records you have kept and to what extent you use it for income producing purposes.

Australian businesses with an annual turnover of $75,000 or more are required to register for GST. However, if your estimated turnover is less than $75,000 there might still be some benefits in registering. Power2 can assist you with your application.

The secret to minimising your tax bill is not leaving your questions until after the end of the financial year. Speaking to a Power2 consultant before the end of the financial year and planning the year to come is the most effective way of saving tax.

It isn’t necessary to complete a return before leaving Australia unless you will not be back before the due date for lodgement of your return (31 October). If you won’t be back until after that date contact the Australian Taxation Office or a registered tax agent such as Power2 to apply for an extension of time to lodge.

Generally, employers are required to supply a payment summary within 14 days of the end of the financial year – i.e. 14 July. If an employee ceases employment part-way through the year, one must be supplied within 14 days of receiving a written request from the former employee and the request must not be made any later than 21 days before the end of the financial year. If a former employee has been receiving reportable fringe benefits (RFB) and leaves before the end of March then the 14-day limit may need to be extended.

You must keep all the records, receipts and other documentation you have used to prepare your tax return. If you are claiming deductions, you must keep written evidence to verify your claims for those deductions.

If you are an individual, you must keep proper records relating to your tax affairs for at least five years from the date you lodged your tax return. If you are a small business, you must keep proper records relating to your tax affairs for at least five years from when the business record is prepared or the transaction is completed, whichever occurs later. If at the end of the five year period, you are involved in a dispute with the Commissioner (an audit, for example), the five year period is extended.

If you use information from your records in a later tax return, you may have to keep records for longer. So, if you carry forward a tax loss, you must keep the records until the end of any period of review for the income tax return in which the loss is fully deducted.

If you own an asset which will be subject to capital gains tax on disposal, you will need to keep records covering the entire period of ownership until 5 years after lodgement of the tax return recording the disposal of the asset.

You do not have to lodge a full tax return.  Power2 can complete the Refund of Franking Credits for Individuals form  at a substantial discount to the price of a normal return.

All income must be declared. This is because the tax office needs to determine what tax rate applies to your other earnings for the year. You may be entitled to an offset to ensure that no tax is payable for your benefit.

You can access the information required from Centrelink online services, Express plus mobile apps and at self-service terminals at Dept. Human Services Service Centres. We can also look up the required information for you.

There is no limit on the amount claimed each year, provided the expenses are necessarily incurred in earning your income. The expenditure must be work-related and you may need receipts to substantiate the expenditure. Power2 are happy to advise clients on appropriate record keeping that will enable them to maximise their allowable deductions.

If you owe tax and lodge your return late, any amount owing will be payable on 21 November this year and a general interest charge will be calculated from then until payment is made. The ATO may charge a penalty of $170 for every 28 days that the return is outstanding. Unless you use a registered tax agent, you have from 1 July until 31 October to lodge your return. If you need an extension of time either contact the ATO or Power2 for assistance on here.

Fees paid to a registered tax agent for the preparation of your return, amendments and generally handling your tax matters are all deductible. Registered tax agents are the only people legally able to receive payment for the preparation of tax returns.

Your return can be completed using the details from a copy of the PAYG Payment Summary, a letter from your employer detailing the information on the PAYG Payment Summary or by reviewing your pay slips for that period. If you are unable to obtain the payment summary details from an employer a Statutory Declaration may need to be completed. Call us to see if we can access this information for you.

No, you cannot do that. A PAYG Payment Summary from a past year cannot be included with the current year tax return as the income on it was not earned in the current year. It can only be included in the return for the year to which it relates. You will need to submit an amendment to last year’s tax return. Power2 can assist you to lodge an amendment.

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4 popular deductions

Below are the four topics we get asked the most about at tax time by clients who are trying to increase their wealth and save on tax.

It is very important to get advice on the following before deciding they are right for you. In some cases they may not be suitable to your circumstances and may even leave you worse off if not approached with the proper level of understanding.

 


Private health

The Medicare Levy Surcharge (MLS) is a Federal Government initiative to encourage individuals to take out private hospital cover, and where possible, to use the private hospital system to reduce the demand on the public system.

The MLS is levied on Australian taxpayers who do not have private hospital cover and who earn above a certain income. Holding Private health cover may reduce your Medicare surcharge levy amount.

If you are considering Private Health cover or already hold some make sure you talk to your Power2 Tax Consultant about the potential tax savings.


Income protection

The main purpose of this type of insurance is to make sure you and your family are not financially disadvantaged due to your wage ceasing when you are injured or ill.

In most cases income protection pays a monthly benefit to help replace your lost income. The cost of cover varies depending on factors such as age, occupation, smoking status and existing medical conditions. There are also a number of options available relating to waiting periods and benefit periods which alter the cost.

In most cases income protection premiums are tax deductible and policy payments are assessable income.

A Power2 Financial Planner can help you to understand what insurance is right for you as well as the costs and benefits.


Negative gearing

Gearing simply means borrowing money to buy an asset such as Property or Shares. Negative gearing means that the interest you are paying on the loan (along with other expenses) exceeds the income from the investment.

Here is an example:

Your purchase a $440,000 investment property with a $400,000 loan
You make annual repayments of $33,925 of which $28,000 is interest in the first year (at 7%).
Other expenses for the year add up to $5,000
$430 per week in rent adds up to rental income for the year of $22,360.
So you have annual deductible expenses of $33,000 ($28,000 + $5,000) but income of only $22,360 (rent) which means there is a shortfall (a loss) of $10,640 for the year.

Depending on your other income the $10,640 loss incurred could lead to a refund of up to $5,000.

It is important to understand that even after any tax refund negative gearing still results in an annual loss. The investor is simply hoping that the growth in their assets value over time will be more than their annual loss in income.

If you would like to understand how negative gearing could affect your situation speak with a Power 2 Financial Planner.


Superannuation

Superannuation is a way to save for your retirement. The money comes from contributions made into your super fund by your employer and, ideally, topped up by your own money. Sometimes the government will also add to it through co-contributions and the low income super contribution.

For most people, super will be taxed at a lower rate than a similar investment outside super and making contributions can significantly reduce the amount of tax you pay.

Of all the different ways to increase your assets and reduce your tax burden we believe superannuation provides the most efficient vehicle.

In some cases you can also hold death, disability or income protection insurance through your super account at a cheaper price and more tax effectively than if you bought it outside of super.

There are many different strategies available related to superannuation that can significantly increase your assets and reduce your tax. Talk to a Power2 Financial Planner about the ones that suit you.

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Why Choose Power2

Why choose Power2 to do your tax?

Life’s short! Don’t waste your weekend stressing about a boring tax return! Delegate to us. We aim to make the experience as quick and painless for you as possible.

Why should you come to Power2 for your Tax return?

  • You get a refund sooner!
    • Most of the tax returns we do are lodged with the tax office the day of your appointment!
  • You don’t have to pay on the day of your appointment
    • If you wish your fee can be paid from your refund.
  • We have specialists to suit you
    • Rental properties, managed funds, salary packaging, redundancy and shares, our team know it all!
  • An experienced Local team 
    • Power2 is locally owned and lodges over 4000 tax returns every year. To do this we use experienced people and quality systems. We make sure we claim every possible tax deduction, rebate and family payment for which our clients are eligible.

So if you are a wage or salary earner; have ABN income; investments such as property or shares, or a small business, then talk to Power2 or request an appointment with us

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Tax time Checklist

Personal Tax Return Checklist

We all could do with a helping hand when it comes to organising our annual tax return so to help you get your tax completed as quickly as possible, we have put together the following lists.

While the ATO makes some of this information available, bringing in your own details ensures things are correct and reduces the possibility of any delays. It also helps us ensure your ATO substantiation requirements are in order, giving you greater peace of mind.

If your situation isn’t covered in the below check list, please bring in all details you have to discuss it further with your accountant.

Importantly, always remember to bring in your bank details (your BSB & account numbers), as without these, we are unable to lodge your return.

  • PAYG Payment Summaries
  • Your BSB and Account number for any refund – Something we need before we can lodge your return
  • Bank interest statement (you can get this through online banking)
  • Employee share plan tax statement
  • Receipts for items purchased for work
  • Receipts if you made donations to charities
  • If you’re new to Power2, last year’s accounting fees
  • Details of your partners income, including salary sacrifice and investment losses
  • Private Health Insurance Tax Statement
  • Income Protection tax summary (if held outside of super)
  • Details of extra super contributions or money withdrawn from super
  • Details of your income
  • Details of expenses for the business
  • Property manager statement (or total income if rented privately)
  • Bank statements for investment mortgage – Interest charges and bank fees
  • Council rates and water charges
  • Insurance
  • Body corporate fees
  • Details of repairs and maintenance carried out (each invoice)
  • All other expenses for the property
  • Depreciation report
  • Contract and settlement statement of property purchase
  • Details of when you first used the property as a rental
  • If you’re new to Power2 – Last year’s rental property schedule
  • Contract for purchase and sale of property
  • Settlement statements for purchase and sale of property
  • If you’re new to Power2 – Last year’s rental property schedule and depreciation report
  • Details of other properties you owned, including if you lived in them and how long they were rented.
  • Dividend statements for all shares (or an old statement for shares that didn’t pay a dividend)
  • Managed fund annual tax statement
  • Details of any expenses for investments, including financial planner fees
  • Interest on investment loans
  • Contract documents for purchases and sales of shares
  • Full transaction history of managed fund
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