These are the top 10 tax laws we believe you must know about if you are an investor or business owner.  Tax can be one of your biggest expenses.  You can always contact us if you want specific advice on your situation.  Our top 10 tax minimisation tips are:

10. Work Related Expenses/ Home Office

If it is related to work you can claim it.  You can claim up to $150 in eligible laundry claims without a receipt and up to $200 without a receipt.  Any telephone, mobile and internet work related expenses will also be deductible.  If you have self education expenses directly related to your field of work you can claim it as a deduction, but not if the study helped you obtain a qualification in a new field.  You may look at the benefits of salary packaging items that are primarily acquired for work- related purposes (eg. Car, laptop, phones, PDA etc) and are FBT exempt.  Certain non - work related expenses may be a partially or fully deductible expense eg. tax agent fees, management fees to financial planners, bank charges/ interest on investments and donations to charities.      

If you do any work from home you will be able to claim a deduction on running your home office.  You will need to work out the usage percentage (eg. office - 9 m²/ house - 100m² = 9%) in terms of the office area compared to the rest of the house.  You will be able to claim this usage percentage of the electricity, depreciation on the carpet, filing cabinets, desks, professional library, computers and equipment.   

 If you are renting your home you can claim the usage percentage (eg. 9%) of your rent and all the normal home office deductions mentioned above.

If you own your home but your home office is actually your principle place of business then you can claim the mortgage interest and all the rates and running expenses associated with ownership as well as the normal home office deductions.   

Again, when you sell the property, your home which would normally be exempt from capital gain tax, will be subject to the same extent as the usage percentage as what was claimed. 

9. Education Tax Refund (ETR)

If you have kids in school you will be able to claim certain educational expenses (eg. Computers, computer related equipment or repairs, internet connections, educational software, school textbooks, prescribed trade tools etc) and receive a 50% tax refund for a primary school child valued up to $780 and secondary school child valued up to $1,558.   You must have received Family Tax Benefit (FTB) Part A for the child or you received a payment (eg. Youth allowance, disability pension, ABSTUDY etc) that prevented you from receiving FTB Part A or your child stopped full time school during the year and received income over the cut - out amount which prevented you from receiving FTB Part A.  Remember to keep your receipts and contact us if you have any questions. 

8. Private Health Care/ Medical Expenses

If you earn over $77,000 pa (single) or as a couple earn more than $154,000 pa then it would be better/ cheaper for you to get private patient hospital cover rather than pay 1% of your taxable income as the Medicare levy surcharge.  You are not required to get axillary health cover (eg. dental, optometry, physio, chiro etc), but that is predominantly where the customer value in private health insurance is today.

Low income earners are exempt from the Medicare levy with a threshold of $18,488 for singles and $31,196 for couples for the 09/10 financial year. 

 If you have had more than $1500 worth of out of pocket expenses provided by a registered medical practitioner including prescriptions then you would be entitled to a rebate of 20% from the ATO.    

7. Write Off

If you have old equipment (plant) or stock that your business can't physically sell before 30^th June then you may consider writing it off and get a tax deduction for that year.  Similarly, bad debts (income) which can't be expected to be collected can be written off and claimed as a tax deduction before 30^th June.    

6. Income Splitting

High income investors and business owners taxed at a higher marginal tax rate (46.5%) can split their income with a lower taxed spouse (0 - 16.5%) or company (30%), where it is done for normal business or commercial reasons. 

 If a taxpayer derives income from personal services and attempts to split that income with family members by diverting it to a family company or trust, then this may be viewed by the ATO as an attempt to avoid tax, and the "anti-avoidance provisions" (ITA Act 1936 (Part IVA) may apply.  

5. Log Book/ Travel Diaries

If you use your car regularly for work purposes, then the best method for you to claim your travel will be via the log book method.  Buy a log book from a newsagent and keep a track of your odometer readings for a period of 12 weeks when you will be using your car a lot.  You should also keep records of associated running costs like petrol, registration, insurance and any repairs and maintenance plus lease repayments.  You will need to do a new log book every five years or if you change cars.  

If you travel more than 5 days interstate or do overseas travel then you need to maintain a travel diary to substantiate your claim.  You will need to record dates, places, times and duration of activities and travel.   

 As an investor, if you visit any of your income generating assets (investments) during the year you can claim your travel as a tax deductible expense.  The ATO sets rates for accommodation, food and drink and incidental expenses. 

4. Tax Effective Investments

Certain agricultural investments (eg. Timber, wine, olives, livestock etc) have received approval from the Australian Tax Office (ATO) to offer a 100% tax deduction which means you can end up paying no tax at all.  You can also claim the GST on these investments so you end up getting a 10% cash refund on your investment.  Contact us if you would like know how to do this.  

The collapse of businesses like Great Southern and Timbercorp ensured when lenders declined additional funding.  This has given agribusinesses a bad reputation however including tax effective investing in your tax minimisation strategy mix is a sound one.  The problem was not agribusinesses but a combination of other factors that can be summed up as bad management.  There is no substitute for sound business principals namely generating cash flow and making a profit.

3. Depreciation

Depreciation is a tax deduction on your properties; it is for the depreciating value of the building or fixtures and fitting on your property.  To claim any depreciation you will need a qualified quantity surveyor's report which costs about $500- $600.  If your building was bought as an investment property and built after July 1987 you can claim 2.5% as a tax deduction whether or not you spend any money.  If you have done major renovations since July 1985 you will also need a quantity surveyors report to work out the deductions. 

You should be aware that when you sell the property, those deductions will be added back into the profit (gain) you will have to pay capital gains tax on.      

You can also depreciate your tools, calculators, briefcases, computer equipment and technical books that helped you earn assessable income.

2. Defer Business Income/ Bring Forward Expenses

If you are a business with turnover under $2m/ yr you might like to use cash basis (where appropriate) reporting rather than accrual.  If you are a business or investor you might try to defer your taxable income (invoicing/ collection) to the next financial year.  If you are already on a high tax rate you might like to pay forward business expenses eg. Prepay interest (13 months advance) to reduce taxable income/ profit.  Remember not to spend money just for the sake of a tax deduction but because it firstly makes good business sense.  

1. Superannuation/ Retirement

If you are under 50 years old you can salary sacrifice $25,000 pa into your super fund and only pay 15% tax.  The amount increases to $50,000 for those over 50 years old. 

If your (or your spouse's) income is under $31,920 and you/ they contribute $1,000 post tax income into your/ their superfund the government will match it with a further $1,000.  The upper limit is $61,920 but it is on a sliding scale so you don't get the full $1000 from the government. 

Super funds have a lower tax rate (15%).  If you are looking to build up your retirement assets you might like to transfer some of your assets into a structure such as a Self managed Super Fund (SMSF).  If you have underperforming stock you might like to realise some of your capital losses and transfer your assets.  You will need about $1,000,000 in income producing assets (excl. your home) for every $50,000 (5% return) you want in passive retirement income.  If you retire at 65 years old you may have about 20 years left to live according to the average Australian life expectancy.  On a current salary of $50,000 pa and 9% ($4,500 pa) super contributions, it will take 222 years to accumalate $1 million dollars - admittedly that is not taking into account compounding interest, dividend reinvestment or capital growth.  Most of us don't have even half that time to build up our assets but around 45 years in a working career.  If you would like advice on building up your assests in the most tax effective way then contact us.   The limitation of this strategy is that your money is locked in your superfund till you retire, which really is not a very long time!