Avoiding tax time stress

It has to be done but are you ready for it? One way to avoid tax time stress is to make sure you’ve got systems in place and your paperwork together before the deadline.

Tax return lodgement deadlines

The financial year ends on 30 June every year, like clockwork. The extended deadline for lodging a tax return is 31 October. You can rely on these two dates as surely as Christmas. As they say, “nothing is life is as certain as death and taxes”. What you do between 1 July and 29 June each year – in terms of storing, recording and managing your personal documents – will make the tax deadlines much less of a chore.

Getting your tax organised

Here are some tips to help individuals get you organised for tax time. Businesses will need better systems and more comprehensive filing routines – but hopefully you’ll be able to employ a book keeper or other expert to help you.

Get yourself two folders – one for receipts, one for bank statements, bills and invoices. At the very least, get into the habit of putting your papers into these two folders as soon as you have paid the bill, or return to your home or office. That way at least you know where everything is when tax time comes around, even if the papers are not nicely sorted.

Proving income and expenses

To complete your tax return, you'll need two main types of records - those that show the income you've received, and those that show any tax-deductible purchases you've made. Here are some examples to help get you started.

Income received:

• payment summaries from your employer and any other paperwork showing your salary, benefits and allowances;
• summaries of benefits received from Centrelink or Veterans Affairs;
• statements showing any dividends or investment income you've received, and
• bank statements showing any interest you earned on your bank accounts and term deposits etc.

Tax-deductible expenses:

• receipts for any deductible items you may have paid for (e.g. eligible work or study-related expenses);
• summary statement of payments for private health insurance;
• other health-related receipts which may entitle you to a tax deduction if you are over a certain threshold;
• receipts from registered charities for any tax-deductible donations you have made.

In addition, you will need any documents showing the sale or purchase of an asset which might be subject to capital gains tax - for example a property (other than your primary residence) or shares. Keep any documents showing the dates these transactions took place. The same applies to dividend reinvestment statements from a unit trust or managed investment fund.

How long do I have to keep these tax records?

Any records that are used to create your tax return must be kept for five years after you lodge your return. If the Australian Tax Office has any queries about your return, they may wish to see these records to verify certain information. Some records may need to be kept for longer - you should check with your accountant, your registered tax agent, or the Australian Tax Office (ATO) to find out more.

When do I have to lodge my tax return?

If you prepare your own tax return (i.e. you don't use the services of a tax agent or an accountant), you'll need to lodge the return by 31 October. If you think you may have a problem getting the required paperwork by 31 October, call the ATO sooner rather than later on 13 28 61 to see if you are able to lodge at a later date.

The ATO also has many tips on its website, such as Tax Basics for Small Business. If you're using a tax agent or accountant for the first time, or a different agent from the one you used last year, make an appointment well before 31 October.