1. GENC3003Personal Financial Planning Andrew Hingstonandrew.hingston@unsw.edu.au Unit 8: Tax returns

2. 2 Preparing a tax return The responsibility is yours Who has to lodge one? Preparing your first return What you need before you start Calculating Capital Gains Tips When to get help

3. 3 Preparing a tax returnThe responsibility is yours … Australia works on a “self-assessment” system. ATO trusts you to: Work out your own tax liability Ask for the help of an accountant if needed Submit a correct tax return that calculates how much you owe them (or they owe you) The ATO then conducts random and also some targeted audits on people / companies. ATO imposes heavy fines if you breach their “trust”. ATO “monitoring” has improved significantly in recent years with better database systems.

4. 4 Preparing a tax returnWho has to lodge a tax return? You must lodge a tax return if: You paid tax during the year Your taxable income > $6000 (for residents) You received a Centrelink allowance or payment and you had received other income, and your taxable income was more than $6,883

5. 5 Preparing a tax returnPreparing your first return Two options: Tax Pack (paper version) E-Tax (via software / Internet) E-Tax is much easier because: You are not inundated with irrelevant information (questions are conditional on previous answers) The software calculates totals and checks your answers You can click on icons for detailed help on questions Refunds are paid quickly Can carry forward basic information from year to year Download software from ato.gov.au … Individuals.

6. 6 Preparing a tax returnSections of a tax return Income – to calculate assessable income Deductions – to calculate allowable deductions Losses carried forward Tax offsets Private Health Insurance Medicare Levy issues Various Adjustments Supplementary sections for some investments

7. 7 Preparing a tax returnWhat you need before you start Copy of last year’s assessment or other documents from ATO to prove your identify. Tax File Number PAYG Summary Statement(s) from employer(s) Centrelink summary statements Your June bank statement that summarises interest and fees for the year Receipts for any deductions Tax summaries for any managed funds Buys, sells and dividends for any shares

8. 8 Preparing a tax returnCalculating capital gains When you sell an asset for more than you bought it then the gains are treated as assessable income and taxed. Unless it is an exempt asset (eg. Family home); or It was purchase before 19 September 1985 For assets purchased after 21 September 1999 and held for more than 12 months: Calculate the gain Deduct permitted “costs” associated with investment Multiply by 50% Add this to your assessable income If you hold for less than 12 months then no 50% discount

9. 9 Preparing a tax returnTax return tips Due by October 31! But can get extension if you call ATO 1+week beforehand with a good sob story! Keep a special tax folder during the year and put any relevant documents in it as you receive them. Make sure you have everything before you start your tax return. If your spouse or parents prepare your tax return then watch them do it this year and do it yourself next year … it’s an important life skill! Keep all records for 5 years

10. 10 Preparing a tax returnWhen to get help Get an accountant if you have: Your own business Investment properties Depreciation calculations Lots of tax deductions A “questionnaire” from the ATO asking you how you derived your calculations for last year’s tax return (a prelude to an audit).

11. Stop and read Now read: Chapter 11 Taxation 11