Tax time tips

A new financial year means getting the necessary paperwork together to maximise your refund for the year just finished, while toeing the tax man's line.

Don't forget to include investment income. Thanks to modern technology, the tax office expects to match income details with third-party data on more than 48 million transactions, including interest payments, dividends and managed fund distributions, to identify undeclared income. Missing even a small sum could put you among the 250,000 Australians to receive a "friendly reminder".

It is also essential to include details of any capital gains made during the year, another area the tax office is cracking down on.

By tapping into the databases of land titles offices, managed funds and even the Australian Stock Exchange, the tax man can identify who sold an investment and when.

While capital gains are added to your total taxable income, capital losses can only be offset against capital gains, not against your regular income. However, they can be carried forward to future years.

On the opposite side of the ledger, the tax office website (www.ato.gov.au) sets out the sort of costs that can be claimed as work-related deductions for a variety of occupations.

If they total more than $300 you will need written evidence of each individual expense. This used to be limited to a tax invoice, but accounting body CPA Australia say the tax man now recognises a wider range of documents such as bank and credit card statements.

Certain workers need to be extra careful at tax time. The tax office has announced it will put the spotlight on deductions claimed by taxpayers working in a range of "focus" occupations including:

• Employee business professionals.
• Hospitality industry service workers.
• Factory hands, store workers and process workers.
• Mechanical, automotive and electrical tradespeople.
• Information technology professionals.
• Mining site employees.

Landlords are also under the microscope. CPA Australia's senior tax counsel, Garr Addison, says: "It is very important that rental property owners have their books in order.

"With an increase of around nine percent in rental income and an increase of 15 percent in deductions in 2004/05, the tax office is carefully scrutinising what rental property owners are claiming in their annual tax returns."

In addition to mortgage interest, property investors can generally claim the costs of advertising for tenants, land tax, insurance, bank charges, pest control, property agents' fees, cleaning, repairs and maintenance, plus council rates applicable to their investment. Addison warns that expenses can only be claimed if they apply to a period when the property was rented or was available for rent.

Faced with a complex tax system, 75 percent of us have our tax returns professionally prepared. Allow around $300 for a return prepared by an agent with membership of one of several accounting bodies. If your tax affairs are simple a '"flick and tick" tax agent costing as little as $75 may suffice.

Or you may be able to use the Tax Office's free online tax return 'e-Tax'. e-Tax can be downloaded for free from www.ato.gov.au, and it can fast-track your refund turnaround time to as little as 14 days.

Comprehensive tax return guide

For the complete story see Money Magazine's July 2007 issue. Subscribe now.