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As the end of the tax year approaches, there are a number of strategies to consider either for the current financial year or to set yourself up for 2008-09.
By Gillian Bullock
Generally speaking if you want to minimise your tax, you should be endeavouring to reduce your income as much as possible while at the same time increasing your expenses. But you have to be reasonable with what you plan to claim as the taxman does not look too kindly on rorting the system.
The Australian Taxation Office has said that it will look closely this year at a range of claims for deductions including expenses for motor vehicles, self-education and travel.
In addition it is sending out information sheets to more than 380,000 people in three key occupations it has targeted this year – nurses, chefs and medical practitioners – outlining common mistakes in the belief that prevention is better than cure.
Also the ATO has said it is expanding its use of data matching to identify under-reporting of capital gains and dividends.
But there are still plenty of things you can claim.
For most people under 30, one of the key ways to reduce your taxable income is to claim work-related expenses. However, you must make sure you have incurred the expense in the year you are claiming for and that the expense is work related and not private nor should it have been already reimbursed by your employer. If you claim more than $300 then you will need written evidence.
Co-contributions are also a tax effective strategy for younger people who may earn less than $58,980 a year. By making a personal contribution after tax to your super, the Government will make a co-contribution. For somebody earning $28,980 or less the Government will make a co-contribution of $1500 if you make a contribution of $1000. The co-contribution reduces by 5c in the dollar above $29,980 before it cuts out at $59,980. It’s a very effective tax strategy. The only negative is that you are tying money up in super for a long time but the free $1500 should make it worthwhile!
Family breaks are probably high on the agenda here. You can still claim the 30 per cent child care tax rebate (it rises to 50 per cent next financial year) but no longer through the tax system. The rebate will now be paid through the Family Assistance Office after you have lodged your tax return and your child care benefit has been reconciled with Centrelink.
The family tax benefit can still be claimed via this year’s tax return but in future will be paid through the Family Assistance Office.