With tax time just around the corner, be sure to think about what you are entitled to claim for your tax deductions. As busy working parents, it’s easy to overlook your eligible tax deductions. However, when you think about the extra cash you get back, its worthwhile spending a little time gathering relevant information.
Here are 8 tax tips that can put extra cash in your pocket:
1. Working from home? Check your home office expenses
Keep all your records of purchases such as a computer, phone, desk or other devices that you are required to use for work purposes, including running costs such as electricity and gas used in your work space.
To qualify for a home office, you need to keep your workspace separate from the general living space.
As an employee, generally occupancy expenses, including rent and house insurance premiums are not deductible, however if you are a sole trader and perform most of your business from the home office, you could claim occupancy expenses as well.
2. Don’t forget your motor vehicle expenses
If you use your car for work, such as visiting clients or travelling from one work place to the other, make sure you keep all your records using a log book. This will allow you to elect the best possible option for greatest possible outcome.
3. Be smart with your work-related education courses/seminars
Working parents often attend courses/seminars to refresh or reinforce their knowledge before stepping back into the workforce. However, work-related education courses are only tax deductible when you are ‘already in the workforce’, and have sufficient connection to your current employment by improving/maintaining skills that you are required. If possible, consider attending education course after you are employed.
4. Check Private health insurance requirement
If your family income exceeds the surcharge threshold, you may be hit with an extra charge called ‘Medicare levy surcharge’ in your tax return. If you are likely to exceed the threshold of $180,000, get yourself private hospital cover.
If your taxable income is close to the higher income tier, finding a few extra deductions will reduce unexpected excess charges.
5. Check Personal Service Income (PSI) Rule if you are contracted through company or ABN
If you are contracted through your company or through your own ABN, be mindful about the PSI rules! If you receive PSI, you need to pass a few tests to be regarded as a contractor and claim business deductions.
The most common test is known as the ‘80/20 test’; if 80% or more of your income is sourced from one client, you are not eligible to claim your home office expenses or payments to associates.
Childcare benefits provided by an employer in their own facility are exempt Fringe Tax Benefits for the employer, and also generally exempt from income tax in the hands of employees who received the benefit. If possible, negotiate with your employer as part of your salary package.
Childcare Rebate, Childcare Benefit and Family Tax Benefits are claimable directly with the Department of Human Services. Bear in mind; you are required to lodge your income tax return and meet income tests to claim some of the benefits such as Childcare Benefit and Family Tax Benefit.
The Childcare Rebate is not income tested. So long as both yourself and your partner work, and the child care is provided for by approved childcare facilities, you are entitled to claim 50% of your childcare expenses up to $7,500 each child per annum.
Department of Human Services provides an online estimator to assess your benefit eligibility. Go to: https://www.centrelink.gov.au/RateEstimatorsWeb/publicUserCombinedStart.do
Again, if your taxable income is close to those limits, it would be worthwhile finding a few more deductions.
7. Donations and school building fund
Keep all your receipts for all your donations over $2 each. You might also be able to claim your school building fund donation. Check your receipts. They might have some information about the deductibility of your donation.
8. Don’t forget to include your parental leave payment in your tax return
Government pensions or allowances such as Parental Leave Payments are taxable income, and should be included in your tax return. However Family Tax Benefit, Child Care Benefit and Child Care Rebate are not taxable payments, thus no need to include in your tax return.
If you think you are paying too much tax, seek help!
Consulting with a tax accountant like Lockwood & Ward Tax Accountants can help you maximise your tax benefits based on your profession. Tax laws change regularly and it is our job to ensure your best possible outcome.