Words of Wisdom
We all have heard some tried and true pearls of wisdom to live by.
With common questions most accountants are asked, particularly random people that we meet that jump at the chance to question an accountant, some of these apparent pieces of common sense, are not so common.
Don’t compare yourself to others
As my mother used to say when I would complain that one of my sisters received something that I didn’t, we must never compare ourselves to other people. This piece of common sense can save much anguish, especially at tax time.
Everyone is different, every taxpayer has different circumstances and not all tax returns are created equal. Just because you and Joe both work in the same role, with the same hourly rate, does not mean you will be entitled to the same deductions and offsets. There are many factors involved including where you live, single, children, insurance coverage, and many more.
If you still feel hard done by because Joe got a larger tax refund than you, take some pride in you having a lower refund. This means that the ATO wasn’t earning interest off your money, and that more money was in your pocket more often.
You get what you pay for
This is relevant at tax time in many ways.
Tax Advice obtained at the pub on a Friday is most likely to not be as valuable as the advice obtained from a tax accountant. Tax Accountants have studied in their field for many years, and are committed to maintaining their knowledge and keeping up to date with ever changing tax legislation.
Tax Deductions, if you didn’t have to pay for anything that relates to you earning an income, then you are likely to not have any tax deductions. One of the guidelines to obtain a work related deduction is that you paid for the expense from your own money and were not reimbursed by your place of work.
Income Protection Insurance can be a tricky one with regards to tax deductions. Rule of thumb is, where income protection is made out of your own pocket, for example a monthly direct debit from your bank account, this is tax deductible. Where this insurance coverage is included in your Superannuation Account, this is generally not a tax deduction. But why? I hear you ask. Superannuation is held in a low tax area, as such, you are already receiving the tax benefits from this payment.
Give and you shall receive…
…a tax deduction.
This is generally correct. Now, I say generally because, not all charities are registered to receive tax deductible donations.
Organisations that are entitled to receive tax deductible gifts are called ‘deductible gift recipients’ (DGRs). An individual tax payer, can claim a tax deduction for gifts or donations to organisations that are listed on the DGR register. The rule here is, wherever you are requested to give money to a charity, ask if the donation is tax deductible or check for yourself by doing a search of the DGR status here.
In a nutshell…
Your tax return is just that, yours. Just because Joe is choosing to claim the tax deduction without a receipt does not make it a legitimate deduction. Always ask yourself these classic words of wisdom, if Joe jumped off a cliff would you? Taking advice from unqualified people can lead to the ATO knocking on your door, and no one wants to deal with the ATO more than they have to.
If you want to influence how much you receive as a refund, speak with a qualified Tax Accountant at Wall Business Services to discuss your options.
– Karen Patterson