How to take the stress out of tax time.

Filing your tax return doesn’t have to be hard. We spoke to accountant Coco Hou CPA of Platinum Accounting Australia and Mark Chapman, director of Tax Communication at H&R Block, to share their top EOFY tips for trades.

The lead-up to the end of financial year is a great time to start ensuring you’ve got everything you need in one place to share with your accountant.

At the very least, Chapman suggests you gather records of:

• Your expenses and receipts. – “The number one mistake clients make is failing to keep receipts,” he says. “Good records are essential – you need substantiation to be able to claim an expense, so take the time before 30 June to dig out those receipts.”
• Those who owe you money.
• Those you owe money to.
• Bank account details.
• Fixed assets that you have on hand at 30 June. – “Make sure you have the dates of any additions or disposals because that may dictate whether or not you get an immediate write-off,” Chapman says. “Everything needs to be up to date by 30 June.”

Forget sorting through shoeboxes filled with receipts and invoices – Hou recommends you use your phone to keep a handy record of purchases throughout the year.

“You can take a photo of the receipt when you make a purchase and once a week or once a month upload it to a cloud-based data storage, such as Dropbox or Google Drive,” she suggests.

“For sole traders who are using Xero, there is a really handy app called Hubdoc that allows you to use your camera to capture the receipt, then pushes that receipt all the way to Xero.”

Keeping track of your work-related expenses as you go will save a lot of hassle come end of June.

“The most common ones are motor vehicle expenses, tools, equipment and the maintenance and repair cost for those tools and equipment,” Hou says.

“Protective clothing that has a logo on it, dry cleaning, training courses and licences are also claimable, as are sunglasses and sunscreen if you work outside.”

You may need to keep a logbook for certain periods of time to help your accountant work out how much you can claim.

“When it comes to motor vehicle expenses, I always ask my clients to keep a 12-week consecutive logbook to work out the work-related percentages,” Hou says.

“If they work from home doing paperwork and invoices, I recommend they keep a one-month logbook so we can track the personal and business percentage of things like home phone and internet expenses and apply the right portion on their tax return as a deduction.”

COVID-19 protective equipment is now claimable too.

“Don't forget things such as hand sanitiser, antibacterial wash and face masks, to the extent that you use them for work-related purposes,” Chapman adds.

From the stress of recession predictions to the subsequent building boom, the last financial year has called for constant pivots for a lot of trade businesses.

For this reason, Hou suggests talking with your accountant about how the past year could play out in your specific taxes.

“Some companies couldn’t operate during lockdown and cancelled their fringe benefit completely [after] selling the company’s vehicles,” she says.

“This is actually a good time for those employers to review all the benefits that they provide to their employees and see if they could do something to bring down their tax bill. For example, I advise some clients to not provide vehicles for employees to use for personal purposes [because] if you work out an arrangement, like the employee paying for the portion that they use, you don’t have to pay the 47 percent fringe benefit tax.”

Similarly, if employee travel changed this year during lockdowns, then make sure logbooks reflect that.

“All these things can be quite useful and when they all add up, it can be substantial,” Hou says.

The most recent Federal budget allocated investment in the construction sector so Hou says it’s a good time to check in with your accountant.

“If you’re hiring new people to help with your business, if this person used to be entitled to JobKeeper, most likely you can apply for hiring credits,” she points out.

“At the end of the year, I always strongly recommend employers get in touch with their accountants to undertake a review of what happened throughout the whole year and see if anything changed, then [we can look at] what we can do to bring down expenses.

“Due to COVID and a range of government programs and incentives, tax time is a bit more complex than usual, and this presents opportunities and challenges that need to be worked through.”