June is just around the corner and it will be tax-time before we know it! Steve and I will be presenting our annual Tax and Property Seminar tonight, providing tips and information on how to minimise tax and create wealth.
Tax has been the talk of the town in Gladstone for some time now, and it still surprises us how little is really known and understood about tax in the “non-accountant/tax agent” community.
So in this article, I just wanted to clear up a couple of common ‘tax myths’ that we have to explain regularly:
- You cannot get
a tax refund if you haven’t prepaid any tax. I know this seems obvious, but we are
often asked to explain why there isn’t a refund due on a tax return, when
the fact is no tax was deducted from (low) wages income, or where a new
business owner has not paid any income tax instalments throughout the
year. Which brings me to Myth #2…
- You cannot get
more tax back than the amount you have paid. Tax refunds arise when your actual tax
liability (calculated when preparing your tax return) is less than the
amount you have paid during the year.
Therefore, you cannot receive a refund greater than the amount of
tax you paid during the year, regardless of the amount of deductions
claimed. Speaking of
deductions…let’s move onto Myth #3…
- $1 Spent on a Tax Deduction ≠ $1 Tax Refund. If you spend $1 on a tax deductible expense, you will get a tax benefit equal to your ‘average rate of tax’. So if that’s say 25%, then if you spend $1 you will get a tax benefit of 25 cents. If your taxable income is below the threshold and you don’t pay tax at all, then you will not get any tax benefit.
These are my “top 3” myths, but there are many more. If you want more information, advice and suggestions to minimise tax, make sure you call us today on 4972 1300 to reserve a seat at tonight’s tax seminar or to book an appointment with one of our tax professionals.