What to look for when it comes to your income
Previously on the Tax Checklist, Accounting Partner, Ricardo took us through the common categories of deductions while highlighting certain considerations in order to make the most of our tax returns. From general expenses to superannuation, Ricardo used a variety of examples to help draw our attention to deductions that we may be missing out on.
Continuing on from Ricardo’s introduction, I will be exploring the different aspects of Income; specifically, those related to an Individual’s tax return.
Income, and what needs to be declared, can be confusing. That is why we, as Accodex accountants, are here to help you!
Common income categories to take note
1. Rental Income
Purchasing a rental property is a popular investment option. Properties can be either positively geared (income is higher than expenses) or negatively geared (expenses are greater than income). Ignoring how the property is geared, all rental-related income must be included in your tax return. This can include retained rental bonds, rental payments from the tenant and insurance payouts.
2. Director’s Fees
Are you a director of a company? If you are paid directors fees, as an executive or non-executive director, these fees must be included in your tax return. Directors fees are generally paid to individuals for attending board meetings and travelling to said board meetings. Did you know that directors fees, as long as the correct process has been followed, can actually be paid as reportable employer superannuation contributions? This is a great tax planning tactic!
3. Trust Distributions
Trusts can be used for both investment and business purposes. Generally, the income of the trust and any capital gains are distributed to its beneficiaries and forms part of the individual’s taxable income. If there are multiple beneficiaries to a trust, income does not have to be distributed evenly – it can be distributed in the most advantageous manner to reduce the amount of tax paid over the entire group; just ask your Accodex accountant how!
4. Dividend Income
Dividends are generally paid from listed investment companies, public trading trusts, corporate unit trusts and corporate limited partnerships. Franking credits attached to dividends must also be declared. Generally, you will be issued with a dividend statement at the end of each financial year. Don’t forget to pay attention to any bonus shares paid in lieu of dividends.
5. Interest Income
Did you know that interest earned actually forms part of your taxable income? Cash investments and bank accounts such as Bonus Savers, all earn interest and it is important that you report this on your tax return. Whilst interest rates are low at the moment, it is still satisfying to see your bank balance increase slightly each month – I mean, who doesn’t love free money!
Don’t forget to give your bank your Tax File Number (TFN). This way tax can be withheld if required.
6. Salary and Wages
Your employer should have provided you with your payment summary approximately 2 weeks after the end of financial year. This payment summary will show your gross wages, any reportable employer superannuation contributions, reportable fringe benefits and total allowances.
Don’t fret if you’ve lost it! You can request another copy from your employer, or, if your employer has lodged it with the Australian Taxation Office, your Accodex accountant will be able to find the information they need.
Following on from here
Like with deductions, going through your income can be tricky and time consuming. This is why, should you ever be unsure, I would highly recommend that you seek expert advice or better yet, do not hesitate to contact one of Accodex Partners’ tax specialists for any assistance.
Written By: Caitie Copley
An original member since the days of Cirillo Hooper, Caitie began as an intern, before transitioning to an Associate Accountant. Since then, her role has evolved, and she began to manage the internal finances of Cirillo Hooper as Finance Manager. Now, Caitie is Accodex’s Chief Financial Officer, responsible for not only the financial management of the company but also Accodex’s Pledge 1% initiative.