With tax time approaching, it can be a headache to process your taxes and claim your deductions. Paying tax on your income is something everyone has to do, especially when you earn money from work and investments.
The amount of tax you pay each financial year depends on two factors - how much you earn and if there are any deductions or offsets you can claim. Frequently, people pay income tax as they earn money throughout the financial year. When you are an employee, your employer will deduct tax from each pay. When you are self-employed, you have to be responsible for setting aside the money and paying it yourself.
During the end of each financial year, many will lodge their tax return with the Australian Taxation Office. You can complete your tax return online through myTax or with support from a tax agent or accountant.
Deductions you can claim
You can claim deductions for some expenses when completing your tax return.
Deductions on Work-related Expenses
To be eligible to claim work-related expenses, you must:
- Have spent the money on yourself (without being reimbursed from work)
- It must be related to earning your income
- You must have evidence to prove your expenses
Work expenses may include:
- Vehicle and travel expenses
- Clothing, laundry and dry-cleaning expenses
- Home office expenses
- Self-education expenses
- Tools, equipment and other assets
Other Deductions
You may also be able to claim a deduction for:
- Gifts and Donations,
- Interest charged by Australian Taxation Office
- Cost of managing tax affairs
- Personally made super contributions
- Dividend, Interest and other investment income deductions
- Undeducted purchase price of a foreign pension or annuity
- Australian Taxation Office interest (calculating and reporting)
Income you must declare
Every financial year, you are required to declare income you have received on your yearly tax return. When filling online, most information is pre-filled from information the Australian Taxation Office has received from employers and financial institutions. This being said, there may be some information you will need to enter manually.
For every tax return, you must ensure that all information is accurate and complete.
These are types of income you are required to declare:
- Employment income
- Super pensions and annuities
- Government allowances
- Government payments
- Investment income (this includes interest, dividends, rent and capital gains tax)
- Business, partnership and trust income
- Foreign income
- Other income – including compensation and insurance payments, discounted shares under employee share schemes, and prizes and awards.
Additionally, you are required to declare earnings you have received from:
- Crowdfunding
- The sharing economy and tax
- Personal services income relating to labour-hire payments.
For additional information, contact Wagtail Wealth today.
IMPORTANT NOTE: This information is general advice only and does not take into account your personal circumstances, goals and objectives. Therefore, you should consider its appropriateness for your circumstances before acting on this information.