5 top tips for tackling your personal tax return

The sound of rustling paper can be heard across Australia as taxpayers gather  all their documentation in preparation for the annual ritual of submitting tax returns gets underway.

To help you along with yours, here are my five top tips to get your personal finance affairs in order before visiting the accountant:

  • Superannuation contributions cap – Keep in mind the concessional and non-concessional contributions caps, as contributions in excess of these caps will attract additional taxes.  Similarly, consider the tax effectiveness of taking the opportunity to make the most of the allowances.  Remember you can bring forward contributions, but you can’t make them retrospectively.
  • Personal Services Income (PSI) – If you earn PSI make sure you review your operations and contracts to ensure you pass the PSI tests. The ATO has produced a comprehensive flowchart to help taxpayers determine whether they pass the test or not.  Depending on your income, passing the test could be the difference between paying tax at the small business company income tax rate of 28.5% or the top marginal income rate of 49%.thumb_ind_ps_glb_ho_2359_resize_1024_0 (1)
  • Gifts – Did you give any tax deductible gifts in FY15? Of course, donations cannot be used to create a taxable loss, however, if any donations cannot be deducted in the current year, as they would create or increase a taxable loss, it may be possible for the loss to be spread over (up to) five years, though a written election is required.
  • Division 7A – Do you have any distributions to a private company, or loans payable to trusts with unpaid present entitlements to private companies? If yes, think about Division 7A.  An unpaid distribution to a private company or loan may be considered as a loan which tax rules may deem is an unfranked dividend.
  • Individual tax rates – Finally, don’t forget, in the 2014 Budget, the Government introduced a temporary 2% budget deficit levy on those with income over $180,000. It was effective from 1 July 2014 and increased the top marginal rate (for residents) to 49% for this financial year.

Nobody wants unexpected surprises in their personal finances at tax time.  These simple tips you could contribute to a smoother, easy transition into FY16.

Happy EOFY!



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