The home straight for tax

IT’S tax time again and there are only two weeks left to lodge your income tax return. If you haven’t done it yet, set aside some time before October 31 or you could be faced with a failure to lodge penalty of up to $550.

It might be worth using e-tax to lodge your return this year. The Australian Tax Office designed this free electronic package to do most of the calculations for you. If you have shares it makes it much easier to complete the section on dividend income and deductions. E-tax also saves you by calculating your tax refund or tax payable and it lets you lodge your tax return via the Internet.

If you do have shares, or you sold some during the last financial year, don’t forget to declare all the dividends you received between July 1 2001 and 30 June 30 2002 on this year’s return.

If you sold your shares last financial year, or transferred the ownership of them to someone else, you will need to include details of capital gains or losses in this return.

To reduce the amount of tax you need to pay, don’t forget to claim all your imputation or franking credits. You will find these listed on your dividend statements.

Don’t miss out on those imputation credits. Even people who aren’t required to lodge a tax return may still be able to make a claim for a refund of imputation credits.

According to the ATO, 8.3 million people claimed a deduction of some type on their 2000 return. Work-related expenses were the most common deduction, and of them, motor vehicle expenses were the most popular in terms of value. The average motor vehicle claim was for $1683. Other popular expenses were clothing, self-education and other travel.

If you have shares, you may be able to claim FID or debits tax charged on dividend income when it went into your bank account, and also account keeping or management fees. If you borrowed money to purchase shares, don’t forget to claim the interest you paid. The cost of advice relating to changes in the mix of your investments is also deductible.

If you own a rental property some of the expenses you might be able to claim include mortgage discharge expenses and security patrol fees. Also travel and car expenses relating to rent collection, or inspection and maintenance of the property. But be careful not to claim deductions for the costs of acquiring or disposing of rental property.

If you work outside and purchased sunscreen lotion, a sunhat or sunglasses last financial year you may be able to claim a tax deduction for those items. People involved in courier and delivery services, oil or gas exploration and horticulture are among those who should be able to make use of this deduction.

If you had a baby after June 30 2001 you may be eligible for a baby bonus of up to $500. Either partner can claim the bonus. To decide who should claim it you will need to consider whose income is likely to be reduced most by the bonus. Be careful though, it is not necessarily best for the person with the highest income to claim it.

As with everything tax, make sure you keep comprehensive records. For shares, you need to keep records for at least five years after you dispose of them.

If you don’t expect to complete your return by October 31 you have a couple of options. You could contact the ATO and try to make alternative arrangements, but that could mean a general interest charge is payable.

An alternative is to get your return to a tax agent by October 31, because they have extended lodgement times. Be careful who you choose though, as the ATO has recently warned to make sure the agent you use is registered.

If you have left your tax return to the last minute because you owe money, you need not have waited. The earliest payment can be due is November 21, no matter whether you lodged your return on July 1 or wait until October 31 to do it.

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