steps to prepare for the Financial year end

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The financial year in Australia is soon coming to an end. Due to the tax cuts this year, you may be receiving a larger tax refund (or smaller tax bill) than expected. Schedule a morning or afternoon right now in your calendar to put in the work and claim everything you are entitled to. Ironically, income earned through your own hard work (personal services income) is the least tax efficient income to receive. Optimise your tax as much as possible, and consider funnelling your refund into starting a more tax efficient income stream.

Financial Year Dates

The financial year in Australia runs from 1st July to 30 June each year.

The ATO requires tax returns be submitted by 31st October, or you risk a fine. This is true for partnerships and trusts as well as individuals.

For those that are already registered with a tax agent, this tax return deadline may be extended. When it is in your interest to delay your tax return submission (ie you are expecting a tax bill) speak to your accountant about your individual deadline.

If you are expecting a tax return this year (anyone with simple taxes and a few deductions), it is in your interest to get this sorted asap. So book your appointment with your tax agent and book a time in for yourself to prepare.

Do you Need a Tax Agent?

Any professionals performing their 1st tax return should definitely hire a tax agent. Ask your colleagues for recommendations to find one that is familiar with your profession and will be able to prompt you to claim appropriate deductions.

If you tax is very simple, and you have performed tax returns through an agent in the past, it is pretty easy to submit your own return, based on previous years.

I can’t see the benefit of attempting to submit yourself if things are more complicated. It’s probably easier to pay a professional if you own investment properties, a trust or are self employed. Your tax agent fee is tax deductible (next year).

Actions to Take Approaching the Financial Year End

  • Schedule a full morning or afternoon to gather all your income and deduction information
  • Schedule an appointment with your tax agent or yourself to submit your return
  • Review your financial plan
  • Rebalance your portfolio if you plan to do that at end of year
  • Now is a good time to update your continuing professional development documentation and make sure your on track to hit your goals

Gathering Information

The ATO website should automatically record income information for employees. You can check on the my Gov website, or your PAYG certificate if your employer still provides one.

Any self employment income through the tax year needs to also be recorded. Hopefully you have kept a track of this through the year, otherwise you will need to search through your online banking to make sure you have got this right.

Investment income also needs to be declared, including bank interest. Bank interest is easily found on your online bank website. Investment income can be a bit more tricky. My experience with micro-investment accounts RAIZ and Quiet Growth in previous years has been that they produce all the documentation, but not for some time after the tax year. Share sight can summarize all your investment income from multiple brokers, and advertises it’s handiness at tax time. I’m signed up as I have brokerage accounts with Pearler* and Commsec but can’t comment on how easy it will be until after I’ve completed the 1st tax return. I’ll let you know!

Next you will want to gather information on tax deductions. If you have a small business, or lots of deductions, it may be worth having a separate account or credit card purely for tax deductible expenses. This makes it a lot easier to keep track of it all.

Deductions May include:

Uniforms – You are able to claim for work specific attire – so scrubs with logos can be claimed, generic smart clothes for clinic unfortunately not.

Education Expenses Relevant to your Current Employment – this needs to be with the aim of increasing your income over the long term. Books, journals and course fees are common deductions.

Stationary – note books, pens, headphones, USBs and cables for work use can be deducted.  A bag purely for work use of reasonable cost, stethoscopes, otoscope and other work specific equipment is deductible.  Paper and ink for your printer is deductible if it is used for work purposes.

Working from Home – If you have worked from home, as many of us have this year there are special rules for 2020-2021. A “Shortcut method” has been introduced where you can claim 80c for each hour you have worked from home. This instead of claiming individually for work related portion of electricity, phone and internet bills, heating and cooling and cleaning. Unfortunately, you cannot use this shortcut method if you were working from home before March 2020. Check out exactly how you can claim on the ATO website.

Home office furniture and equipment (e.g. printer and laptop) can be claimed immediately if they cost under $300. If they cost more, you will need to claim them as an annual depreciation.

Postage costs – for work related post

Tax cuts – You don’t need to do anything about claiming the extra tax you have paid since the 2021 tax cuts. These will be automatically refunded as part of your claim.

Schedule an Appointment

This is an insane period of time for accountants. If you are keen to get your hands on a tax refund, book in early. If you owe money, call your accountant and work out when is the best time to book in.

But also schedule an appointment for yourself to do the prep work. 2-3 hours of work preparing everything for a thorough and accurate tax return could pay very well!

Most people find that other people’s priorities trump their own. There is a good chance if you haven’t actually scheduled a time in your calendar, that you will be scrambling to get it together in an hour before your tax agent appointment. Being called into work to cover a gap in the roster, your child getting sick and a million other dramas will inevitably arise to prevent you getting your tax prep work done.

Missed deductions are wasteful, and inaccurate information could score you a stressful tax audit and get you into trouble. It is not worth getting into strife with the tax return.

Other Financial Year End Activities

Review your Financial plan

Either the financial year end, or the start of the calendar year (or both) are great times to review your financial and life goals. Priorities change, and you want to make sure you are still working towards goals that are meaningful for you. It is also extremely motivating to tick off the goals you have achieved, and reflect on the progress you have made in a year towards the huge goals.

Rebalance your portfolio

The financial year end is also a good time to rebalance your portfolio, if this is consistent with your rebalancing plan.

Continuing professional development

I know. This is very painful! But you’ve got to review your continuing professional development plan and submit all your documentation at some time. Why not get it over in one lot? If you need to pace these exciting activities, at least take the financial year end as an opportunity to schedule your CPD year review and submission(s).

Get sorted for the financial year end! Schedule those appointments. While your busy adulting, subscribe to this blog so you get even better at financial adulting, creating a life of abundance and choice.

Aussie Doc Freedom is not a financial adviser and does need offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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