7 Money Tips to Increase Your Tax Refund
Have you done everything you can to maximise your tax refund this year? This month is your last chance. The 1st of July will be too late and yet it is sometime in July or August we usually make the time to sit down with our accountant and see what can be done to get back some of the tax we have paid from our hard-earned money. Here are 7 tips to increase your tax refund this year.
You can be proactive, make a time to see your accountant before the end of the year or you can be reactive, and only go to see your accountant when you are ready to lodge your return. Funnily enough it is the second option that most people actually do however, it is amazing how much difference you can make to your tax refund with a little bit of planning.
There is a huge difference in good and bad tax deductions. Just like there are huge differences in good and bad debt. Let me explain.
Tip 1. Don’t waste $1 to gain .40c
A tax deduction can be given because you have spent money. In some cases, for example purchasing a car, or a piece of work equipment can give you a deduction. If you have purchased the item to increase your deductions, not because it was vital or unavoidable, you have just fallen into a common trap. You have thrown away a dollar to make 40cents.
Tip 2. Keeping the right records can be easy.
Most people miss out on their full tax deductions simply because they’re disorganised. There are great apps out there now for taking photos of your receipts and storing them digitally. Another ‘old school version of this is to stick them into a paper diary – you have the added benefit of it being date recorded as well.
Tip 3. The magic of OPM – Other Peoples’ Money.
Property investing (and share investing) has the benefit of using other peoples’ money – borrowed money. The great part is you are maximising your returns, and at the same time the interest on the borrowed money is tax deductible.
Tip 4. Not all deductions are good deductions.
Just because the interest is tax deductible it doesn’t make every ‘investment’ worthwhile. Always look at the benefits very closely before the lure of a tax deduction draws you in. For example, Novated Leases – may not be the best way to buy a car even though it is a tax deduction.
Tip 5. Pre-paying expenses.
A little known trick… You can organise to prepay expenses for the following year. e.g. A full year’s interest in advance can be paid on investment properties, you can prepay rates and utilities as well as memberships and other costs. Make sure you obtain advice and get the right records to support your claim.
Tip 6. The brilliance of depreciation.
My all time favourite. By buying new investment properties instead of old you get the magic of being able to claim depreciation of the fixtures and fittings as well as the building costs for up to 40 years! This is true magic money at tax time. Each property can give you $10-$15k in free tax deductions ongoing! Utilising depreciation and OPM (tip 3) can save you thousands and thousands of dollars from your tax paid and actually increase your overall wealth at the same time.
Tip 7. The right advice.
Having a great accountant to review your unique position and give you personalised advice can save you and make you thousands as well. Great accountants form valued members of the Think Money Success Team. Make an appointment to meet and discuss your tax needs before June 30!
Getting your paperwork in order for tax time can be simple. Think Money has all of the tools available for you to make sure you maximise every cent.
Our property management event ‘Organised Owners’ will assist you in ensuring you make the most of our Property Management System and property record keeping software. We also invite guest speakers – accountants, insurance specialists and property managers to name a few, to come and share their vast knowledge with you as well.