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Tax Planning Pointers for Individual Tax Payers

• Zone Offset – record the number of days that you spend in Zone A or B, especially if you live in Zone B but spend some time in Zone A during the year.
• Private Health Insurance – from 1/7/12 the 30% private health insurance rebate will be income tested. High income earners should consider prepaying their private health insurance premium prior to 30/6/12 to escape the change.
• Personal Insurance Payments – premiums for Sickness and Accident Cover are tax deductible.  Payments can be made by the employer without incurring Fringe Benefits Tax.
• Home Office Expenses – if you use an area in your home, you can claim the expenses of a home-office.
• Utilising Tax Free Threshold – every adult taxpayer has a tax-free threshold of $6,000.  If a taxpayer is verging on losses, consideration should be given to the decision being made in relation to the  valuation of stock, bringing forward or delay of sales etc., to utilise the tax-free threshold otherwise it will be lost forever.
• Tax Offsets – there are a number of tax offsets available within the income tax legislation.
• Work-Related Expenses – items such as travel, uniforms, laundry of clothes, subscriptions, union fees and self-education.
• Dividends, Interest, Managed Funds Distributions etc. – the ATO matches information provided in tax returns with information received from external sources, such as public companies, banks, managed funds etc.
• End of Year Tax Schemes – the ATO produces product rulings on various investment products that are marketed particularly around 30th June each year.  To avoid confrontation with the ATO, it is best to consider investing in products that have obtained a product ruling.  These product rulings are not a guarantee or government endorsement on the likely success, or profitability, of the investment.
• Salary Packaging – salary packaging can also assist in the minimisation of income tax, particularly in the areas of voluntary superannuation contributions and acquisition of assets that are not subject to fringe benefit tax such as supply of a motor vehicle.  Your employer is required to report the value of fringe benefits on your payment summary.  That may have an effect on other government payments you receive.
• Superannuation Contributions – special concessions are available to low income or non-working spouses relative to superannuation contributions.
• Medical Expenses – if your medical expenses exceed $2,000, you can claim a tax rebate calculated at 20% of the excess of $2,000.
• Wage/Salary Earners – wage/salary earners should review all of the items under Personal Planning and in addition give consideration to property income and expenses if the tax payer has a rental property.  All income from a rental property should be declared.  General expenses can include real estate agents fees; building allowance (can be written off at 2.5% or 4% depending on date of construction); depreciation of fixtures, fittings, plant and equipment; share of depreciation of common property in a strata titled property; repairs and maintenance; pest control; interest on monies borrowed for investment in the property; bank charges on the property bank account; cleaning; electricity; rates; land tax; insurance and travel for inspection trips by the owner apportioned for partly private travel.
• Work-Related Motor Vehicle Expenses – under 5,000 kilometres calculated at the rate advised by the Australian Taxation Office for the type of vehicle used.
• Work-Related Expenses – in particular, note the total of work-related expenses included in the return, as compared to the amount the Australian Taxation Office is going to allow for persons who do not wish to prepare income tax returns ($500 in 2011/12).
• Managed Investment Schemes – it is recommended that you have a meeting with your professional accountant prior to committing to a Managed Investment Scheme (MIS) investment.

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written by:

McKinley Plowman