Happy new financial year!
July may not be the time of year when you typically think of new resolutions, but having just applied yourself to your EOFY obligations, now is an opportune time to reflect on how easy (or otherwise) it was to access and compile your tax receipts and documents last financial year.
Yes, the next EOFY feels sooo far away, but hear me out…
If your current system proved less than desirable (or even stressful) last June, it’s probably an indication there’s room for improvement. Say hello to your new organised friend: the start of the financial year, or SOFY.
A gift to your future self
SOFY is the perfect time to take a good, hard look at your record-keeping practices.
To claim a tax deduction for a work-related expense, you must have a record (usually a tax receipt) to prove you’ve incurred the expense.
Think about the way you gather and file your tax receipts and documents over the course of a year. Could your method or approach be more organised?
If so, here are six tips to get you started:
1. Take a systematic approach
Your current system may include tossing all your tax receipts together in one place (AKA ‘the shoebox method’). If that works for you, that’s fine – a good start.
Systems need not be rigid. They can be designed to help you solve problems.
Example: If you’re feeling frustrated from having to spend time sifting through a large box of paper receipts, that can be a problem. Look to your systems to solve it.
2. Divide and categorise
Let’s face it, a large pile of mixed paperwork can feel overwhelming and difficult to conquer, even if you’re feeling brave enough to dive in headfirst. If this sounds familiar, consider an approach to divide and categorise.
Example: Place dividers in your ‘shoebox’ (or equivalent) and label them according to the ATO deductions categories (D1-D10) set out in your tax return.
3. Describe and conquer
Adding descriptions to each category label can help you make sense of things later.
Example: Label your categories with just enough detail: ‘D1: Work-related car expenses’, ‘D2: Work-related travel expenses’, ‘D3: Work-related clothing’, laundry and dry cleaning expenses’, and so on.
4. Go digital
Digital storage can be a simple way to keep all your tax receipts in one place.
Examples: Take photos of any paper receipts and store them digitally on your phone or electronic device. Create a dedicated folder (or folders) in your photo library. (Bonus points if these are labelled accordingly.)
5. Try advanced tax prepping
For advanced tax-preppers, consider having a system (either digital or hard copy) that helps you attach invoices and documents with their corresponding bank transactions.
Example: Keep an Excel spreadsheet, Word document, or piece of paper where you jot down dates, expenses and payment methods. Link or attach any other relevant detail you’ll need come EOFY.
6. Leave enough time
Keeping organised and processing your tax return in a timely manner will not only make it easier for you and your tax professionals; it’ll also prevent costly errors due to inaccuracy. Ensure you get all the benefits you’re entitled to, and reduce the likelihood of unnecessary penalties like late fees from missing important due dates.
Examples: Set aside some time each quarter to ensure you’re keeping up with your tax obligations, and check important details are up to date. Consider booking ahead of time to meet with your accountant or financial adviser.
The important thing is to find a system that works best for you.
Clear and accurate record-keeping is always good practice – not just at tax time, but anytime.
…May your SOFY resolutions bring you many happy (tax) returns.
If you need help to get your finances in order and plan for the future, call us at Align Financial on (02) 9913 9995.
