The tax season is over for me — hooray
November 7th, 2006Finally getting used to the idea that the tax season is over for me. I have some time (at least I will once I catch up on all those things I put off until the end of the tax season).
You can no longer do your own return on line. Most tax agents have closed. But … if you haven’t done your tax return yet you still have options:
- Some of the larger—branch office—tax agents are still open. Check out the phone book.
- There is always your local accountant.
You have until May 2007. Don’t leave it until the last minute, as these people will be busy then.
As for me, I’m free until the next round of schooling starts. Alas, tax is not something you can learn once. You need to remain up-to-date. The law changes. You need training to remember the basics, and training to know what has changed by law.
Finally got my own tax return done
October 30th, 2006You’ve heard about the builder whose house is always in disrepair; the plumber whose taps always need washers. Well guess what.
Finally got my tax return done—11:30 Sunday night.
That’s two days early, but that’s because I know I’m doing 12 hour days at the office Monday and Tuesday (30 and 31st October.)
Multiple year tax returns
October 29th, 2006I cannot believe the number of multiple year returns we have got in the last few days. Almost every person who comes in has two, three, four years of returns to do.
I know what has ‘motivated’ them. Many of them come in clutching letters from the ATO. “You haven’t done your tax return … please do this or you will be fined … per year.”
What I don’t understand is how they come to have so many years not done in the first place.
Well, I suppose I can, really. 31 October comes around and you realise you have missed the deadline for some reason or another, and then the next year you’re unsure what to do because you missed last year, so you don’t do anything, and the problem is compounded.
Take my advice. Fix it sooner, rather than later. Otherwise one day you might get a letter from the ATO threatening to fine you.
Final date for lodgement of your tax return is approaching fast
October 24th, 200631 October is the final date for lodging your tax returns.
The tax agents and accountants are very busy right now. If you haven’t done your tax return yet, start getting serious about it.
First though—was last year’s tax return done by a tax agent or accountant? Are you planning on going back to them this year? If so, you can ask your agent/accountant to organise an extension with the tax office. This gives you until May next year to lodge your return.
If your are going to do this, do it now, and then keep out of the tax agent’s way until after 31 October—because your tax agent will be busy busy between now and the end of the month. Very busy.
It’s important to remember that.
Don’t walk into the agent’s office on Saturday morning (28 October) and expect to see an agent. Unless someone has just cancelled, you’re unlikely to get in.
Don’t walk in with five years of returns and expect them to devote three to four hours with you. They won’t. They can’t.
If you roll up in the last few days of the month with a job like this you’re likely to be asked to come back after 1 November. After all, you’re already four years behind, what’s another few days?
Be nice to your tax agent. They’re working long hours. There’s a lot to do, and a lot of pressure to get things done by the end of the month.
If you are asked to supply extra information, return it promptly. It could mean the difference between getting your return in by the 31st or not.
At this late stage, make sure you have all your paperwork.
Understand that if you walk into the tax agent’s office with anything but a basic return on 31 October you may miss the deadline. It usually takes a couple of days for potential problems to be checked, returned and followed up.
One last thing to remember.
Your tax agent may not be there after 31 October.
Most tax offices are seasonal. They open for the tax season, and close at the end of it. If you need to follow up any issues, or want to see a tax agent outside of that time, you will have to go to one of the branch offices that is open all year round.
Employee Share Acquisition (ESAP) taxation election form
October 18th, 2006Suppose you work f or a company that pays its bonus in shares.
Your company shares are worth $25 each.
This year you get a bonus of $1,000, paid as 40 company shares. Your total outlay—$0.
Two years later the shares are worth $40 each. You decide to sell them. You pocket $2,000.
How much capital gain have you made?
That depends on whether you signed a 139E or not.
The 139E, also known as an Employee Share Acquisition Plan (ESAP) Taxation Election Form.
When you get the shares, print out a 139E form, fill in the details, sign and date it, and put it with your tax records.
You must sign it the year you get the shares, although you only need to produce the form if you are audited.
What does this form do?
If you sign the form, the value at which you are deemed to have acquired the shares is dollar value the company they were worth when you acquired them—in this case, $25 per share.
If you do not sign the form, the value at which you are deemed to have acquired the shares is $0.
- In the first instance, any capital gain will be calculated at $40-$25, or $15 per share. A total of $600.
- In the second, any capital gain will be calculated at $40-$0. A total of $1600.
That’s a big difference.
Know enough about your own tax affairs to be sure your tax agent/accountant is doing their best for you
October 1st, 2006Had a recent case of a young relative living interstate who took his tax to an accountant to do.
This relative is unusual for his age (mid-twenties) in that he already has two investment properties. A good start to his financial security in later years. Both properties are in this state, not the state where he is working. In the past year he visited both properties at least once for minor maintenance. (He’s a builder by trade.) It’s a 1200km round trip by car.
Lack of information number one. He did not keep a log book.
He took his tax in to a local accountant, and told him about the investment properties.
The accountant did not claim for visits to the properties. He said that because he did not have a log book he could not claim.
Lack of information number two. My relative was not aware (until he talked to me) that you can claim up to 5000km without a log book, as long as you can justify the expense, and have reasonable proof for the claim. By then it was too late, as the tax return had been lodged. (There are such things as amendments, but that’s a different post altogether.)
I don’t know why the accountant said he couldn’t claim the trips.
This is a very common claim.
Unfortunately, my relative had no idea what was claimable and what was not. He trusted the accountant to know what he was doing, and in this case the trust was misplaced.
In an ideal world you should be able to trust your tax agent or accountant to do the right thing by you, but this is not an ideal world. The only way you can safeguard yourself against incidents like this is to know what is claimable and what is not for the investments you have. Otherwise you are at the mercy of the accountant or tax preparer and have to believe them.
As one large bank used to say, “It’s your money, Ralph.”
Life at the office
September 8th, 2006Tax is taking over my life at the moment. And not in a good way. This seems to be the time when all the issues are coming to the fore.
Fringe benefits are rearing their ugly head, and young nurses - in particular, those with HECS debts - are being affected. Fringe benefits are complex, but if you have a HECS debt and/or no private health, my recommendation. Do not consider it. A combination of both is deadly.
Allowances are another area for concern and for some reason, are often not taxed.
But my biggest issue is that I am so tired.
We are getting some unhappy customers at the moment because their return is not as good as last year, or because they really expected a lot more back.
On a brighter note, the happy ones that come back more than make up for the unhappy ones. And the good thing is, the unhappy ones will not be back next year, so all is well.
On the other side, I have had others that have tried to do it themselves, or gone elsewhere and did not like the result so they come in and want me to look at it. This I don’t mind. It creates goodwill and you know that when it does get too hard, they WILL come to you.
How to find a good tax agent
August 30th, 2006You get good, bad and mediocre practitioners in any profession. Tax is no different.
So—how do you tell a good tax agent from a bad one, or even just an ordinary one?
First up, remember that what suits one person may not suit another. Some people have a fair idea of what they can claim and just want the tax agent to cover off anything they may have forgotten, like Medicare, or their HECS/HELP debt. Others want the tax agent to be thorough and cover off everything, whether it is relevant to them or not.
Here are some suggestions to help you choose a tax agent that is suitable for you.
Personal recommendation
If one person recommends a tax agent then it may be that they found them good, but you won’t. If two or more people recommend the same tax agent then you can start thinking this person might not be too bad.
How do you know if a tax preparer someone recommends is good for you?
Listen to what the person says when they recommend them.
“She was very thorough,” suits someone looking for an in-depth analysis of their tax situation, while, “He didn’t muck around. I was out within 20 minutes,” suits someone who knows they have little to claim and just wants it done.
My personal favourite recommendation is, “I got back more than I expected. She claimed … and … for me. I didn’t know I could claim those.”
To me, that’s a tax agent who is doing his or her job. Checking out things you would not normally think to claim yourself, but are entitled to. That’s the reason you go to a tax agent in the first place, rather than completing your own form on-line.
Call them up
Still not sure if this is the right agent for you?
Call them up. Talk to them. Ask to talk to the person who would be doing the return. Ask questions, see what answers they give. If you think they sound okay, make an appointment.
Be reasonable about when they can talk. They may have a client with them and have to call you back. You’re more likely to catch the actual agent if you call outside a busy time. It’s frantic between mid-July and mid-August, and again at the end of October.
Don’t ask questions that are better suited to the interview. This is a screening call. Your sole objective is to discover whether or not you are compatible. “How much money will I get back?” or “What can I claim?” are not appropriate. Your questions should be more along the lines of “How do you work?” and ”What should I bring?”.
Make the appointment with the person you are talking to on the phone, not just with anyone in the office.
Junior tax advisers
Tax is seasonal. Busy four months of the year and then it stops.
Like any other seasonal work it has a high turnover. New agents are trained every year.
No matter how good a freshly trained tax agent is, they always lack one thing. Experience.
Remember that.
Conversely, one thing a new tax agent always has is support. It’s rare for a first year tax agent to be left on their own, especially in the first two months. The person supporting them is experienced, and available to answer questions.
Don’t forget, too, that returns are checked by the office accountant before they are lodged.
Not all branches are equal
There are two big tax agencies in Australia—ITP and H&R Block. Whilst you will find that they have standard policies they adhere to, they are staffed by individuals. You may find the staff in one branch suit you better than those in another.
One last thing to remember. If you had a bad tax agent last year, don’t go back. Find another one. Can it be any worse? Would you go back to a dress shop where you got bad service, or would you find somewhere else? You’d find somewhere else.
That’s what you should do with tax agents.
Don’t blame your tax agent because you have to pay tax
August 19th, 2006After completing their tax return some people find they need to pay tax.
No-one likes to pay tax, but most people take it on the chin. A small, but noticeable, proportion though, immediately get angry with the tax agent and start abusing them.
It is not the tax agent’s fault.
Common reasons might you have to pay extra tax include:
- HECS/HELP debt
- Centrelink payments
- Bank interest
- Two or more jobs
- Investments
- Personal services income
- Capital gains.
The first two are by far the most common.
HELP (formerly known as HECS) debt
You go to university. You defer your HECS/HELP debt. You get your degree. Then you get a job. Then you get a pay rise, and another, and another. And one day you hit that magic threshold—$36,185 for the 2005/06 tax year—where the HECS/HELP debt kicks in.
This debt is repaid through your tax. Your company takes out extra tax to cover it. But if you haven’t told them you have a debt in the first place, they don’t know they have to take money out for you. It is your responsibility to inform the company you work for that you have a debt.
‘I forgot’ is not an option here. The company will ask you, when you start working for them, whether or not you have a HECS/HELP debt. The average HELP debt runs to over $10,000. How can you ‘forget’ a $10,000+ debt, particularly when it increases with the cost of living.
You’re a little more unlucky if you have two or more jobs, none of which is over the threshold, but which combined take you over the limit. As soon as you reach that limit you must start repaying the debt, so start planning now.
Centrelink payments
Centrelink payments are added to your income.
Thus if you get some money from Centrelink throughout the year, and some money elsewhere, the two amounts are added together and this total income is what is assessed for tax purposes.
Bank interest
You can get some good returns from bank interest at the moment.
If you have $50,000 in an investment account you could easily earn $2,500 interest. $10,000 in an interest-bearing account could net you $500.
That’s all taxable, and if you were a good corporate citizen and gave the bank your tax file number when they asked for it, the bank hasn’t withheld any tax on the interest. Why should they? It’s not their job.
Allow enough tax to cover HECS/HELP
July 28th, 2006Does anyone have a HECS/HELP debt? We have ordered in extra tissues just for you.
So many companies don’t allow enough tax to cover a HECS/HELP debt. It can be a bit of a shock (and that is an understatement) at tax time if you have one of these debts, and your company has not been taking enough tax out to cover it. The reasons for this vary, but a common one would be you change jobs and are in a higher bracket, which means not enough has been taken out to cover you. Or you get a pay rise, or you have fringe benefits which income is not taxed on, but your HECS/HELP includes this amount in the calculation. Another reason is bonuses. Often, I have found these are not taxed either. Do you have a second job? Have you received any Centrelink payments?
A simple check to ensure you are coved. Talk to your pay office. Remember that up to 8% of your total income, including fringe benefits, bank interest, etc., may be added to your tax bill if you have a HECS/HELP debt. If your total income is over $35,000 check your tax.
At $21,600, your tax will be $4140. Then add 1.5% medicare. After that, for every $1, you lose 31.5%. From approximately $35,000 upwards, anything between 4% to 8% should be added to cover HECS/HELP. Very rough estimates, but make sure you are covered.
Like anything, it is not quite that simple. It all depends on your income, and your repayment percentage increases with your income. Allowing 8% ensures you are covered fully. If you would like more acurate figures, I will be happy to supply them. The threshold changes every year, so I have not given figures at this stage as they will be outdated by the time you do your tax next year.
In the meantime, tissue anyone?
