Dr Adrian Raftery, an Associate Professor at Deakin University and author of 101 Ways to Save Money on Your Tax - Legally! 2017-2018 edition(Wiley, June 2017, AU$25.95) shares with us excellent tips for you to action and maximise your tax refund next year.

The new financial year is here which comes which comes with it the annual obligation to submit our income tax return by 31 October.  Like most, you are probably in a mad panic trying to find your receipts to scrap together in a futile attempt to boost your refund (or worse reduce your payable) with some last-minute claims.  For others, 1 July brings around a new sense of hope with a whole year to get our tax planning right in 2017/18.

It always surprises me when people think that tax planning only occurs in June each year. Well, it may for those who are either not very organised or perhaps have been swayed by some savvy retailers who make us think that EOFY is when it all happens. But if you want to save as much as legitimately possible on your largest expense (tax), I encourage you to start tax planning on the first day of July each year. Tax planning should be a 365-day per year exercise, not one merely carried out in the last few weeks before 30 June.

Here are ten strategies are more applicable for action at the start of the year (1 July) than at the end of the year (30 June).

1. Put $20 per week into super

I must admit that for years I was surprised how few people actually took advantage of getting some free money from the Government in the form of the Superannuation Co-Contribution.  This is where those you earn under $36,813 could contribute $1,000 post-tax into super and the government would match it with an extra $500. Whilst this incentive gradually phases out above this threshold at $51,813, it’s free money! But then I realised that someone who is a low-income earner would really find it tough to miraculously pluck $1,000 on the last day of June and whack into super.  In reality, if they did find that $1,000 they would probably have other, more-pressing priorities on where to best utilise the lump sum. That is where the start of the financial year is the best time to start this super co-contribution strategy. It is a lot more manageable if you start taking $20 from your weekly pay and putting into super, rather than trying to find $1,000 at the end of the year.

2. Build your nest egg quicker by salary sacrificing

In a similar vein, those who earn more than $37,000, salary sacrificing into superannuation is one of the best, and legitimate, ways to minimise your income tax bill. Although the super rules have changed from 1 July, you can contribute up to $25,000 per year into super which is only taxed at 15 per cent instead of your marginal tax rate (potentially 49 per cent).  Like the super co-contribution, very few maximised this strategy each year as it was often too late in June to try and top up the compulsory super contributions to the threshold. I know a lot of people baulk at super as they are sceptical with what plans the Government will have in the future with the growing honey pot but if you can put in over a lifetime an extra $1,000,000 as a couple into retirement savings then you are potentially saving $340,000 in tax (plus any returns on top of that).  Could that $340,000 mean you could retire a few years earlier or perhaps enjoy a more comfortable retirement?  I’m sure it would so start putting extra super away in your pay packet when 1 July arrives.

3. Do a logbook

Generally work-related car travel is the biggest tax deduction (in the thousands) for individuals yet I see so many people who fail to maximise it.  If you use your car for work-related purposes, a logbook is the best way of maximising your deductions but again this is something that you can’t just wave a magic wand with and do on 30 June — it takes 12 weeks of diligence in keeping accurate logbook records. I know from personal experience that logbooks are annoying creatures to fill out but it's just a minute in the morning, a minute in the evening, maybe 120 minutes over the year for potentially an extra $5,000 in tax savings.  Now it's important to keep your receipts for all costs associated with the running of your car (such as petrol, insurance, registration, servicing and lease payments), not just the log book period. And don't try and claim your travel to and from work; only genuine travel you take as part of your role that is not paid for by your employer.  If you change your job role, get a new car or your last logbook is more than five years old, then you need to start a new one. 

4. Keep your receipts with myDeductions

Poor record-keeping is oft associated with low refunds. Tax agents cannot wave a magic wand if you don’t do the basics and keep your receipts throughout the year for your work or business -related expenses. The ATO’s rule in most circumstances is that no receipt results in no deduction so if you take work-related car travel as an example you could be costing yourself $$$ by not keeping those petrol dockets! Get into a habit early in the year.  The ATO have a great app called myDeductionswhich is an easy way to diligently record your receipts for year end by simply taking a pic with your mobile device at the time that you incur the expense. With the ATO continuing to ramp up their audit activity yet again it is important that you keep your receipts.

5. Buying tax-deductible assets

Unless you are a small business (and can immediately write off the purchase of new business assets that cost less than $20,000), it is pointless buying a tax-deductible asset that cost more than $300 at the end of the financial year.  This is because depreciation of these assets is pro-rated for the number of days that you own them during the financial year (resulting in a $1000 outlay on 29 June producing a measly $1 deduction at tax time).  If you are going to get that new computer or car used for work-purposes, it is better buying in July rather than in June as depreciation have much more impact when spread over a whole year rather than just a few days.

6. Negative gear upfront

One of the major downsides to negative gearing is cash flow. My preference is that you wait until the end of the year to get your refund as it is a forced form of saving. But if cash flow is tight, you may want to complete a pay-as-you-go (PAYG) withholding variation application, which reduces the tax from your monthly pay. The form is virtually a mini tax return which estimates your taxable income. You still need to lodge an annual tax return. Your variation generally finishes on 30 June each year so you need to do a new PAYG withholding variation application each year — they do not roll forward.  Ensure that you remain disciplined and use the extra money to meet cashflow shortfalls for the investment property, rather than using it for everyday living expenses.

7. Pay extra tax upfront

If you struggle to save, a great ‘forced form of saving’ is to ask your employer to take out extra tax in each pay packet.  Hopefully after a few pays, you won’t notice the $30 or $60 coming out per week but you will give yourself a huge high-five when you get your refund cheque with an extra $1500 or $300 at year end. The downside is that you don’t earn any interest on this money so if you are disciplined, start an interest-earning savings account and do the same each week and make your money work a bit more for you.  For those in business, ensuring that you have enough to pay the BAS, employees’ super and your own end of year tax can be a challenge so whack in approximately one third of income into a separate bank account to cover for these outlays.

8. Don’t do it just for tax

Don’t spend purely to get a tax deduction. Many people get suckered in by the sneaky marketing methods of retailers to buy items that are ‘fully tax-deductible’. Remember that it is a play on marginal tax rates. Even if you are on the highest marginal tax rate, you are only getting a maximum of 47 per cent back. If you want a $50,000 tax deduction before 30 June I will gladly invoice you and accept payment. But you will only get a fraction back as a tax benefit and the transaction has reduced your bank balance and will affect cash flow.

9. Lodge your tax

There are a number of slackos out there that simply procrastinate and not only don’t lodge a tax return on time, but have several returns outstanding. Get them in as you could be costing yourself thousands in unclaimed refunds. My record was submitting 33 years’ worth of tax returns which netted the lucky person over $70 thousand in refunds!! If you know that you have to pay then lodge your return to avoid unnecessary late lodgment penalties. The ATO is always willing to negotiate payment plans.

10. Get a great accountant

Just as most people can change a tyre, most of us have the ability to do our tax ourselves but it usually pays to get an expert to look at your tax for you. The last thing you need is a knock on the door from the taxman because you claimed too much. A registered tax agent knows where the boundaries are in terms of what you can and more importantly can’t claim. And their fee is tax deductible too! Really maximise your accountant’s knowledge by communicating with them often about your affairs.  Aside from pre-year end tax planning, contact them before any major transaction that you are about to undertake as a simple phone call may produce a simple strategy – such as setting up a company - which could save you hundreds of thousands over a lifetime.  It is far easier structuring a transaction before the event occurs than months after!

You now have a whole new year to implement some great tax tips, it’s time to take action. Times are tough so every dollar saved counts. Start your tax planning today!

This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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These tips were provided by Mr Taxman, Adrian Raftery, author of 101 Ways to Save Money on Your Tax - Legally! 2017-2018 edition(Wiley, June 2017, AU$25.95). @mistertaxman www.mrtaxman.com.a

101 Ways to Save Money on Your Tax – Legally! 2017-2018 edition
By Adrian Raftery
Published by Wiley June 2017
ISBN 9780730344940
AU$25.95 / NZ$28.99

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For further information or to request an interview, please contact: Theo Vassili, Wiley Publicist (T) 03 9274 3225 (E) tvassili@wiley.com. Adrian Raftery can also be reached directly on 0418 210 599 adrian@mrtaxman.com.au or adrian.raftery@deakin.edu.au