23 Feb MY MATE SAID
“MY MATE SAID”
These are the three words that make every accountant see red!
In theory how much tax you pay is a nice neat formula; take the income you have earned less the deductions you can claim & then work out how much tax is payable. Easy huh!! Except for a million tiny details!
So why is the advice your mate, or the taxi driver, or the guy at the pub not the be all & end all?
- Different deductions are allowable for different occupations for e.g. if you are a police officer you might be able to claim gym costs but most other professions can’t.
- Different work circumstances dictate deductions; if you drive to the same office each day you can’t claim car expenses however if you have to take heavy & bulky tools to a different work site every day you can
- Business vs Employee; if you are an employee there are going to be many things you can’t claim that you could if you were a business. For e.g. personal super contributions
- There is a good chance that the advice you are being given is specifically for tax avoidance! For e.g. you here that if you buy a big screen tv for the world cup then you can claim that $2500 tv as a computer monitor. When you get this kind of advice picture standing in front of the ATO Auditor (I bet he looks like your old school principal!) & justifying that. Tax minimisation is completely legal – tax avoidance will cause you a whole new world of pain.
Remember the game chinese whispers at school where one kid would whisper I got a new dog & it would end up being I skipped rope with my sister? Well treat unpaid tax advice with the same kind respect! Free advice is great if you are talking to someone qualified but otherwise check this kind of advice with your accountant.
And one more thing, accounting fees might put you off, but you wouldn’t go to the cheapest brain surgeon for brain surgery now would you so why rely on dodgy advice to reduce your tax debt?