Walking through the city the other day, I noticed a few advertisements starting to pop up that were encouraging people to purchase their product before tax time.
Every year, big companies use tax time as a reason to try and push their products and services and encourage you to buy more things to save on tax. But, A LOT of the time, there are no tax incentives from these purchases. I have the unfortunate task of explaining to new clients that they have been duped or they just remain completely unaware that they have been fooled.
Here are the top 3 tax time deceptions for you to avoid:
- Office supplies
Every June, you are guaranteed to get bombarded with leaflets and TV advertisements from office suppliers encouraging you to purchase up big before tax time. However, there is one major rule that most people don’t know. If the item cost more than $300, you cannot claim the cost all at once. So, if you purchased a $1200 laptop on June 30, thinking you were outsmarting the tax system (as the advertising led you to believe), you’re actually only allowed to claim a maximum of $2. So, my tip is to purchase equipment over $300 based on when you need it, not on trying to save on tax.
- Private Health Insurance
The advertising from Private Health Insurance companies really heats up in June and is extremely deceptive. It’s often asking people to take out Private Health Insurance before June 30 to save on tax. However, what people don’t realise is that the tax the advertisements are trying to encourage people to avoid, the Medicare Levy Surcharge, is a tax that most people don’t actually have to pay anyway. The Medicare Levy is applicable to the majority of people, this is the tax we pay to have access to the Medicare system. But the Medicare Levy Surcharge is only applicable to high income earners who don’t have the hospital cover of Private Health Insurance ($90,000 for singles and $180,000 for families). Because the Medicare Levy and Medicare Levy Surcharge taxes are similar in names, the Private Health Insurers use this to their advantage to try to make most people think they are saving tax by taking out there policies, when they’re actually not.
- Out of Pocket Medical expenses
The rules around being able to claim a percentage of out of pocket medical expenses has changed considerably and the whole offset is getting phased out. Previously, people used to be able to claim a whole range of medical expenses and receive money back on their tax refund. However, this is only open to people that have claimed the offset in the 2014 Financial Year, and the 2015 Financial Year will be the last time this can be claimed unless the medical expenses relate to disability aids, attendant care or aged care. So be really careful if some medical service providers aren’t up to date with the tax rules and encourage you to take out expensive medical procedures because you can get it back on your tax return.
While all of these products or services mentioned might be products or services that you actually need, it’s important for you to buy them because you NEED them, not because you’ve been encouraged because of a potential tax saving which doesn’t actually apply.
Contact us on 1300 541 777 if you have any questions about this blog. Our friendly tax consultants help people across Australia with an easy 15 to 30 minute tax phone call or at one of our offices in Adelaide, Melbourne or Brisbane.