Tax: Adrian Raftery

The start of the financial year is the best time to plan how to maximise your deductions

The new financial year is here, and it comes with the annual obligation to submit our income tax return by October 31. Like most people, you are probably in a mad panic trying to find/scrape together your receipts in a futile attempt to boost your refund (or, worse, reduce your tax payable) with some last-minute claims. For others, July 1 brings around a new sense of hope with a whole year to get their tax planning right in 2017-18.

It always surprises me when people think that tax planning only occurs in June. If you want to save as much as legitimately possible on your largest expense (tax), it is best to start as early as possible. Tax planning should be a 365-day-a-year exercise, not one merely carried out in the few days before June 30.

Here are seven strategies that are more applicable for action at the start of the year (July 1) than at the end (June 30).

1PUT $20PW INTO SUPER

I must admit that for years I was surprised how few people took advantage of getting some free money from the government in the form of the superannuation co-contribution. This is available to those who earn under $36,813 and contribute $1000 post-tax into super, with the government matching it with an extra $500. But then I realised that someone who is a low-income earner would really find it tough to miraculously pluck $1000 out of the air and whack into super on the last day of June. In reality, they would probably have other, more pressing priorities for where to best utilise the lump sum. That is why the beginning of the financial year is the best time to start this super co-contribution strategy. It is a lot more manageable if you take $20 from your pay each week and put it into super, rather than trying to find $1000 at the end of the year.

2BUILD YOUR NEST EGG QUICKER BY SALARY SACRIFICING

In a similar vein, for those who earn more than $37,000, salary sacrificing into super is one of the best ways to minimise your income tax bill – and it’s legitimate. Although the super rules have changed from July 1, each year you

can contribute up to $25,000, which is taxed at only 15% instead of your marginal tax rate (potentially 49%).

As with the super co-contribution, very few maximised this strategy each year as it was often too late in June to top up compulsory super contributions to the threshold.

If you can put an extra $1 million over a lifetime into retirement savings then you are potentially saving $340,000 in tax (plus any returns on top of that). Would that $340,000 mean you could retire a few years earlier or perhaps enjoy a more comfortable retirement? I'm sure it would, so start putting extra super away in your pay packet when July 1 arrives. 3KEEP A LOGBOOK

Work-related car travel is generally the biggest tax deduction (in the thousands) for individuals, yet so many fail to maximise it. If you use your car for work-related purposes, the logbook method is best, but again this is something that you can't just do on June 30 – it takes 12 weeks of diligence in keeping accurate records. I know from personal experience that logbooks are annoying creatures to complete, but it's just a minute in the morning, a minute in the evening – maybe 120 minutes over the year for potentially an extra $5000 in tax savings. It's important to keep your receipts for all costs associated with the running of your car (such as petrol, insurance, registration, servicing and lease payments), not just the logbook period. If you change your job role, get a new car or your last logbook is more than five years old, then you need to start a new one. 4 KEEP YOUR RECEIPTS WITH MYDEDUCTIONS Poor record-keeping is often associated with low refunds. Tax agents cannot wave a magic wand if you don't do the basics and keep your receipts throughout the year for your work- or business-related expenses. The ATO's rule, in most circumstances, is that no receipt results in no deduction, so if you take work-related car travel as an example you could be costing yourself many dollars by not keeping those petrol dockets. Get into a habit early in the year. The tax office has a great app called myDeductions, which is an easy way to record your receipts by simply taking a picture with your mobile device at the time you incur the expense. 5BUYING TAX-DEDUCTIBLE ASSETS

Unless you are a small business (and can immediately write off the purchase of new business assets that cost less than $20,000), it is pointless buying a tax-deductible asset that cost more than $300 at the end of the financial year. This is because depreciation of these assets is pro-rated for the number of days that you own them during the financial year (resulting in a $1000 outlay on June 29, producing a measly $1 deduction at tax time). If you are going to get that new computer or car used for work purposes, it is better buying in July as depreciation has much more impact when spread over a whole year rather than just a few days. 6NEGATIVE GEAR UPFRONT

One of the major downsides to negative gearing is cash flow. My preference is that you wait until the end of the year to get your refund as it is a form of forced saving. But if cash flow is tight, you may want to complete a payas-you-go (PAYG) withholding variation application, which reduces the tax from your monthly pay. The form is virtually a mini tax return that estimates your taxable income. You still need to lodge an annual tax return. Conversely, for those who don't have a property, if you struggle to save, a great form of forced saving is to ask your employer to take out extra tax in each pay packet. 7GET A GREAT ACCOUNTANT

Just as most people can change a tyre, most of us can do our tax ourselves but it usually pays to get an expert to look at it for you. The last thing you need is a knock on the door from the taxman because you claimed too much. A registered tax agent knows where the boundaries are in terms of what you can and, more importantly, can't claim. And their fee is tax deductible too!

Maximise your accountant's knowledge by communicating with them often about your affairs. Aside from pre-year-end tax planning, contact them before any major transaction that you are about to undertake, as a simple phone call may produce a simple strategy – such as setting up a company – which could save you hundreds of thousands over a lifetime. It is far easier to structure a transaction before the event occurs than months after.

You now have a whole new year to implement some great tax tips. It's time to act. Times are tough so every dollar saved counts. Start your tax planning today.

Wait until the end of the year for the refund, as it is a form of enforced saving