Michael Croker, tax leader at Chartered Accountants Australia and New Zealand said preparing your taxes at the start of the new year means you’ll be better prepared come tax time and may receive a better return.
“Taxes are not just an annual event,” he said
“Some Australians stress out about tax, but it doesn’t have to be that way.
“Preparing for your 2019 taxes throughout the year can not only make the tax return process smoother, but it may also help to maximise your return”.
Here are Mr Croker’s top tips to take control of your taxes in 2019:
- Look back at last year’s return
Mr Croker recommends revisiting last year's tax return to work out the areas you found particularly perplexing and address them early.
“Hopefully by now you’ve already filed your 2018 return. If you haven’t, now’s the time to get cracking!” he said.
“However, if you’ve already done this year’s taxes, take some time to reflect back and think about the areas that were particularly demanding or complex for you.
“Now is the time to plan, so that your next tax return is stress-free.”
- Set up a system
He warns against waiting until the last minute to organise the documents and receipts you will need for your tax return, as collating them early could mean a bigger refund.
“Much like skinning a cat – there’s more than one way to organise your tax records,” Mr Croker said.
“Don’t wait until the end of June to start organising your important tax documents and receipts.
“Have a system to keep everything in one place."
- Adjust your PAYG withholding or hang out for a tax refund?
Mr Croker advises familiarising yourself with the amount of PAYG tax being withheld from your pay packets to ensure you are not shocked come tax time.
“The amount of PAYG tax withheld each pay day determines whether you’ll get a refund, break-even, or owe tax when it comes to filing your tax return,” Mr Croker explained.
“Whether you want your tax return to act as an annual savings plan, or prefer to break-even, the goal is to eliminate any surprises at tax time.
- Retain your receipts
He said although it is unlikely that the ATO will want to see your receipts, it is imperative that you keep them on the off chance you are audited.
“If you own a business or plan to claim taxable deductions, it is imperative you hold onto your receipts,” Mr Croker advised.
“Whilst receipts are not needed when filing your tax return, they are usually required should the Australian Tax Office (ATO) decide to audit your tax return.
“There are helpful smartphone apps to help keep track of your outgoings, but when it comes to filing, you should speak to your accountant about what you can and can’t claim, as it varies person to person, and year to year. This is especially true of big-ticket deduction claims, like car expenses, travel and self-education.”
- Chart your charitable contributions
'Tis the season of giving, and should you choose to give over this holiday period, Mr Croker recommends keeping a record as your donation may be tax deductible.
“Fortunately, doing good for others has the benefit of giving your tax refund a boost.
“Keep records of all tax-deductible gifts and contributions you make over the year,” he recommended.
- Sort your super savings
Mr Croker advises taking the time to sort out your superannuation as part of your tax planning. He recommends considering voluntary super contributions, knowing where exactly your super is invested and ensuring your employer set-up super accounts are consolidated.
“Employers pay 9.5% of employee earnings into super, but are you thinking about contributing more for your retirement yet? If you have some funds to spare, extra contributions can be tax effective,” Mr Croker said.
“Learn more about your super. Log into your super fund account, check your balance, and know what’s going on including what option(s) you have invested in.
“Also make sure all your super accounts are consolidated into one as having multiple accounts means paying multiple fees, so take the time to roll your accounts into one if that makes things easier and less costly for you.”
- Check for new tax rules and policies
Mr Croker said it is important to research the changes that may have occurred since you filed your last tax return, to ensure your claim is up to date and correct.
“Tax and super rules change constantly so don’t wait till tax time 2019 to check-in with your accountant for an update,” he said.
“There may have been tax breaks you have taken advantage of in the past that are no longer applicable, or there may be tax legislation changes that have come into effect impacting how much tax you will owe.
“With a Federal Election coming in 2019, think about the tax policies of the major parties and the impact on your finances.
“It pays to know,” Mr Croker advised.
- Don’t make financial decisions based solely on potential tax breaks
He warned Australians who may be spending more to gain a tax break, as they may end up worse off as a result.
“The ATO offers plenty of deductions that have the potential to reduce your tax liability,” Mr Croker said.
“But if you’re spending the cash just to get a tax break, you may end up worse off.
- Plan for the unexpected.
Lastly, Mr Croker said even if you have followed his aforementioned advice, it is important to plan for the unexpected as you may receive an unforseen tax later down the track.
“Nobody likes receiving an unwanted tax or super top-up tax bill – let alone an unexpected one.
“The ATO expects you to manage your cashflow and pay your tax when due,” he warned.
For a comprehensive list of what's on the ATO's radar with your taxes, click here.