Tamed Dollar

Well the new school year is rapidly coming upon us.  And like every new school year there are costly items to purchase – computers, stationery, textbooks, school shoes, uniforms, lunch boxes, backpacks etc.

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Schoolkids Bonus – check your eligibility as first half year payments are being made now.  Unfortunately this payment will only be paid to eligible families until the end of 2016 due to a deal the Abbott Government made with Clive Palmer but until then many families are eligible for two instalments (January and July) of $211 for primary students and $421 for secondary students.

Tips for saving on Back to School Costs

• Before purchasing any school books check what you have at home – pencils, books, etc may have enough use in them to see out at least a term to stagger the costs.
• The school booklists may seem like a simple thing to do but they are often more expensive than you can get by shopping around – Don’t just tick everything and order shop around check your stock levels at home and pricing at other stores.

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• School fees – some public schools allow you to spread the cost over the year by using Centrepay.  Centrepay is when you direct Centrelink to send some of your payment to a third party, in this case the school.
• Look at 2nd hand books – find a parent in the year above your kids that you can do a “cheap” purchase deal on textbooks from.  This helps them as they get some much needed money to purchase their school supplies and you also get the books at a fraction of the cost.  At my daughters previous school I had an arrangement with a parent the year above her and a parent the year below – win-win

Well another New Year has snuck up on us.  2015 promises to be another busy one for my family and me but one I intend to embrace with everything I have.  2014 got away from me in the latter half of the year and I have been rather remiss in updating this blog and intend to remedy that this year with consistent posts about budgeting problems and solutions.  I really would like to hear from people what they would like to hear about.

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I’m hoping that you had an enjoyable break over Christmas and New Year with your families.  I, unfortunately, had to work over the break including weekends and some of the public holidays but that is the joy of shiftwork!   If you’re like me, you are probably spending some time in January taking stock of your current financial situation with the excesses of Christmas behind us and a whole new year ahead of us.  Parents will also be worrying about the back to school expenses that hit at this time of year.

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I would imagine that a number of people reading this blog will have spent up big on credit cards over the festive period and starting to wonder how they can repay the money.  People are probably also wondering if there is a better way to do Christmas each year than the credit card with the heavy interest.  I firmly believe that planning for Christmas should start in January.  Why you may ask?  Well the credit card hangover that hits in January is stressful and lasts for months, if not years.  Since I started planning for Christmas in January I have not suffered a Christmas hangover.

So do you have a Christmas hangover?  Do you want to have a Christmas where you don’t suffer with a hangover for the next year?  Well here are my suggestions for a hangover free January.

• Open up a separate savings account with your bank that you put money into directly from your pay.  Most banks now have a Christmas Club account – these often only pay a very small amount of interest but you can’t access the money without closing down the account – a good idea if you aren’t disciplined to leave the account alone until required in December.  Work out how much you require for Christmas – presents, food,  entertainment etc and divide that by the number of fortnights left before December and start putting this in the account straight away.  If you put just $10 per week into this account from this week until the end of November you’d have $470 to spend on Christmas!
  

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• Every time you do your grocery shopping put a $20 gift card in your trolley.  You won’t really notice it on your weekly shop but do this fortnightly until December and you will have $460 in gift cards to use on groceries.  If you get a Coles/Myer or Wish card you have a range of other stores that you can use these cards in which you can use for presents.
  

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• Utilise lay-by services in store.  Most stores offer an 8 week lay-by system where you pay a nominal fee for them to keep the items put away until you’ve paid for them.  The toy sales in the middle of the year are a great opportunity to put the kids presents away for an even longer period of time with a pick up date just prior to Christmas.
• Purchase things on sale throughout the year.  This is a great option if you have people who are easy to buy for as you can have things sitting aside ready for Christmas.  Just don’t forget you’ve purchased items!  I recall finding some clothes last year I’d bought on special for my son a few years ago that I forgot about and found them after he had grown 3 sizes above them!  I must regift them 😉    A good way to remember what you have put away is do a spreadsheet with the people you need to buy presents for and what you intend to buy and then make a note when you have purchased them so you don’t double up.

I really hope these tips help you to start to prepare for Christmas 2015 even though Christmas 2014 is such a recent memory.

Well some people would have already lodged their tax returns by now, I have.  So what do people intend to do with their refund?  Do you intend to use it to pay down debt, get ahead on bills, take a holiday or something else?

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I personally like to use my refund to restock my budgeting bank accounts ready for the next twelve months and pay some extra on my mortgage.  I’m fortunate that most years I get about $1500 in my refund so it is a good figure to do some serious budgeting with.  This year I will be getting about $1700 and will be putting $700 straight into my budget bank account for bills and the other $1000 towards my mortgage.  I like having a good buffer on my mortgage for weeks when something happens and I need to take a breather on my repayments.

My top tips for making the most of your tax refund

• Start your emergency fund: set up an account ready for your emergency fund.
• Pay down debt: a lump sum is a great opportunity for you to start your Dave Ramsey Debt Snowball.  Imagine how good it would feel if you have a $1500 return and a $1700 credit card debt to get that started and only owe $200?  How quickly could you pay that $200 off and then start snowballing into your next debt?
• Pay some bills: get ahead on some bills or pay your insurance for the next twelve months.

Whatever you decide to do with your tax refund make it work for you.  After all this is money you worked hard to earn and it is a bonus that you are getting it back.

Dealing with the Child Support Agency Australia (CSA) would have to be one of the most arduous tasks that separated parents have to tackle.  I personally have struggled with the child support system and what, appears at time, the slow process in recovering money for the children.  The many issues with CSA that I’ve faced have included no communication of what is occurring, long times in them being able to track down an income source for my ex, my ex telling them he isn’t working, him lying about income to reduce his liability to name but a few.

I have found when dealing with CSA it is best to

• Be polite – I believe most CSA officers genuinely want to get money for you but are often limited by the legislation the government has written.  Remember they are following this legislation, they are not out to make this hard for you.
• Keep a diary – log every call you make, what information you gave them, and what occurred during this call.
  

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• Get receipt numbers – whenever you contact CSA to make an enquiry a receipt number is generated.  Keep this receipt number.
• Have a list of questions ready to ask and paper to write down the response.
• Call CSA with any little bit of information you may have that could be relevant to your case.
• Be patient – it can take a long time for them to get a result.  They are hampered by limited legislation that really doesn’t make it easy for them to actually get the money.  I believe there needs to be penalties for non-payers but until the government sees fit to look at the legislation the children have to wait.

My biggest piece of advice

This took me a long time to accept but now that I’ve accepted it I feel a lot more comfortable in my situation.

• Don’t rely on getting child support.  It is not guaranteed.
  

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• Learn to budget without child support.  Yes it’s tough but it can be done.  Remember if you go through an entire financial year without the correct amount of child support that Centrelink will do a reconciliation of your Family Tax Benefit and you will be paid arrears if you’ve been underpaid due to not getting child support.  This lump sum can then be put away to budget for the following year.

Even though I’ve been separated for eight years it’s only the last four years that have been difficult with CSA.  The reason – the ex got a new girlfriend who taught him all the tricks to avoid paying child support.  Everytime he made an adjustment on his record e.g. lowering his income substantially I would be forced to lodge an appeal.  I won every appeal I have lodged.  This means that CSA backed me with every appeal and it proved that he’s been doing the wrong thing. I have cried many tears over the past four years, sporadic payments, fortnights where I get virtually no Family Tax Benefit because CSA have told Centrelink I should be getting X amount.  Centrelink then reduce my payments because of this “expected” amount.  It’s tough but I’m doing it.  I also hold onto the fact that I will get arrears payments of FTB at the end of the financial year which I can use to support the children for the following year.

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CSA say be patient because one day he will slip up and decide he doesn’t need to be careful.  They said they regularly get non-payers who think they’ve got away with it and now can do ten years worth of tax and get all their refunds at once as their child has turned 18.  CSA said many have been caught out by doing this as the debt doesn’t go away.  It remains forever and will come out of an estate when the person dies.  It will come.  CSA may ask you to waive that debt when your kids are 18, but don’t.  You have worked hard to provide your kids without this money, you are entitled to it.  You just have to be patient. It’s taken me a long time to get to a point of acceptance that I’m no longer getting child support.  CSA are still trying but he is making it incredibly difficult.  They have him in the intensive collection team but I’m no longer holding my breath waiting for the children’s money.  I have now learned to budget without factoring in child support so if it comes it will be a nice little surprise to put away for something special for the kids.

Often one of the hardest parts about living on a low income is being reliant on welfare payments for some or all of your income.  There is a stigma attached to being reliant on welfare and for many people it is demoralising to be required to report to Centrelink about what they are doing.  Queues and wait times are often long and lead to anger at being reliant on the system.  Dealing with Centrelink can cause frustration and stress in itself as the system of payments is very complicated.

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It is very hard for the average person to work through the maze that is Centrelink but it can be done.  I am fortunate in that I understand the Centrelink system better than an average person.  You see I worked at Centrelink for a number of years before I had children.  And even though payments have changed over the years I have just had to keep up with the information rather than trying to understand a totally foreign system.  I have experience working with Newstart, Pensions, and Family Tax Benefits.  I understand what questions to ask staff and what records to keep to ensure I have the paperwork trail when dealing with them.

Issues for staff

Whenever you deal with Centrelink please keep in mind that the customer service officers are human beings too trying to support their families.  They are trying to a hard job under sometimes trying situations.  Here are some common issues that would occur when I worked there:

• One big problem is that Centrelink naturally has a large number of offices and large numbers of staff employed at those offices.  If you think as a person walking off the street the payment system is complicated, imagine having to know the ins and outs of payments and legislation and being across changes.
• Staff turnover in the call centre is huge as it is such a stressful job which means that there are always new people just learning their way.  Centrelink staff don’t mean to get things wrong but they are human and whilst learning such a complicated system they can make mistakes.
  

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• I remember when I was working there that the media would report a change in the news and so we would be inundated with request from the public for information.  We would know as much as everyone else having heard it on the news the night before ourselves!
• Also the computer systems are erratic because it is a massive system and there are always going to be bugs that need to be worked out.  One frustration staff have is that the system would be updated over a weekend and we’d come in on a Monday and there would be new screens and old ones gone without any notification or information on where to find things.  This would mean it would literally be trial and error for the next few days trying to find things.

My top tips for dealing with Centrelink

• Be polite – this would have to be the biggest tip I can give you.  There is only so many times a day a customer service officer can be called a b***t, a Centrelink whore, or yelled at before you really wonder why you bother trying to be nice.  Sometimes no matter what you do for a person they will treat you like trash purely because you represent the organisation.  I know there are some not so great Centrelink workers, I’ve worked with them, but on the whole the majority are trying to do the right thing by their customers so cut them a break.
• Documentation – ensure you have adequate documentation for you visit.  Ensure that when they photocopy the documentation that they date stamp it.  Make a note in your diary as to what you have lodged on that day.
  

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• Get receipt numbers – whenever you contact Centrelink to make an enquiry a receipt number is generated.  Keep this receipt number.
• Keep a diary where you document what income you earned, what date you reported, and the receipt number you were given.  Make a note of any discussions you had with an person at Centrelink in your diary.  This really helps with recall if there ends up being a discrepancy between what you said and what occurred on your record.
• Be patient – it takes time to serve people.  The government is very good at reducing staffing levels to save money but this comes at a cost to the remaining staff and customers.  Expect to be waiting on hold for a few hours and use this time to have a coffee and read a book why you wait.  Being prepared for a wait makes it not seem so tiresome.
  

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• Have a list of questions ready you need to ask and paper to take down notes.
• Best times to contact Centrelink – there are some very busy times that really should be avoided when contacting or attending Centrelink without an appointment.  Monday or a day after a public holiday – unless you absolutely positively have to DO NOT CONTACT as it will be insane.  Between 12pm-2pm as it is lunch time.   I find about 11am or 2.30pm about the best times to make contact.  If lodging your forms at an office about 3.30-4.30pm is normally quiet as most people get in early and get that out of the way first thing in the morning.

Credit cards have become an integral part of our society.   People use them daily to purchase all types of goods and services.  Money Smart website states that collectively Australians owe around $34 billion dollars on credit cards.  This equates to approximately $4,400 per credit card holder who are paying an average of $800 per year in interest on rates up to 20% per annum.  That’s a whopping $6 billion dollars in interest every year!

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Would you rather have that money in your account?

Are you sick of having credit card debt hanging over your head and holding you back?

Do you feel burdened by credit card debt?

Then you need to consider a balance transfer credit card.

What is a balance transfer?

This is when you transfer the total amount on your current credit card to a new credit card that offers transfer rates for credit cards at 0%.  There is normally a fixed period for the 0% rate which ranges from 6 months to 12 months depending on the card.  What this means for you is that instead of paying around 17% interest you pay 0% interest on that amount for the fixed period.  However, be careful because you will accrue interest on new purchases you make.  Also be careful as sometimes they charge a yearly card fee that will cancel out any savings you make on not paying interest.  So remember to do your sums prior to accepting an offer.

How does this help me get out of debt?

If you are currently paying 17% interest on your card even though you are paying money off, it is still accruing interest.  That means only some of your payment is paying down the balance, the rest is just paying interest.  Transferring to 0% card for a fixed term means for

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that fixed term you pay no interest on that balance.  This means if you are putting $100 a month to pay off the card that the whole $100 comes off the balance.  It makes good economic sense to pay 0% interest.

How do I work out what I need to pay?

Say you get a 0% balance transfer for a fixed period of 12 months all you simply need to do is divide your total amount owed by 12.  This will give you the amount you need to pay every month in order to pay it off prior to the 0% period ending.  If you truly want to be rid of your credit card debt forever then as soon as you receive your card cut it up and do not spend a cent on it.

Let’s look at a scenario

Bob and Jenny have a credit card debt of $1500 with an interest rate of 17%.    They have decided that they no longer want a credit card debt and so no longer put purchases on the card.  However, they don’t understand why it doesn’t seem to be reducing even though they are paying the minimum monthly payment.

The minimum payment is $22 per month.  This is going to take them a whopping 241 months (20 years) to pay off this debt.  They will also pay a total of $3784.06 in interest!

If they were paying $50 per month it will take them 40 months (3 years 3 months) to pay off this debt.  They will pay $467.01 in interest.

They’ve decided they want this debt gone in 12 months so they divided the total owed $1500 by 12 months to work out they need to pay $125 per month.  However, because interest is still accruing it would actually take them 14 months to pay off the card.  By transferring over to a 0% card now, paying $125 per month, they will save $155.87 in interest.

Now wouldn’t you prefer that $3784.06 in your pocket?  I’m sure I would.

The basics for creating are budget are to ensure your expenses are not more than your income.  Whilst you can do this with pen and paper it is much better to use budget management software as you can closely track your spending.   When you are preparing your budget it is also important to set financial goals so you can make a plan of how to achieve your goals.  Over time you can see how your expenditure changes and what you are actually spending your money on.

One such program is Easy Budget.  This personal finance and budgeting program has been designed to be used by people with no financial background.  It tracks your bank accounts, investments, assets, income and expenses.  You program into it what you require in regards to income type and expenditure.

Easy budget allows you to track your daily expenses and save money as you can easily see where you are over spending.  You can generate reports and graphs that can easily show you how your budget is holding up.

You only pay once for this system as there is no ongoing subscription costs with all upgrades and updates being free.  It can also be used on multiple PC’s that you own.

Using budgeting software actually saves you money over time as you are more conscious of where you money is going.  You tend to think twice about what you purchase as you have to enter it into the software and the software doesn’t lie about what you are spending.  The Easy Budget Software shows you clearly how much your daily cup of coffee is actually costing you.  If you pay $4 for a cup of coffee on your way to work five days per week, over the course of a year you are spending $960 per year on coffee (taking into account four weeks annual leave).  Could you think of better uses for that $960?  I can.

I believe one of the best ways to financial freedom and surviving on a low income is to reduce your personal debt.  When I talk about eliminating debt I am talking about credit cards, personal loans, and money loaned from family or friends.  Whilst a mortgage is debt it is a positive debt, that is a mortgage eventually gives you the financial freedom of owning property and in the long term property values tend to increase.  Also you need to pay for accommodation whether that be rent or a mortgage and I personally prefer to pay off a mortgage than someone else’s investment property.

The only debt I have is a mortgage.   I used to have a GE Credit Card that I solely used for the interest free promotions but I cut that up three years ago and now pay cash for big ticket items from savings.  The freedom of not owing money (other than my mortgage) and being able to pay cash is quite liberating.

It is important to pay off debts as quickly as you can as this frees up money for you to use to live.

Best ways to eliminate debt

1. Cut up your credit cards!
2. List all your debts: include all money you owe – credit cards, mortgage, personal loans, loans from friends or family.
   

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3. List these debts in order of amount owed.
4. Pay out the smallest debt first whilst still paying the minimum payments on all other debts.  Roll your credit card onto a 0% on balance transfer credit card – some of these are for six months but you can find some for 14 months.  That means 14 months of NO interest as long as you don’t use the card so CUT IT UP!
5. When you’ve paid out the first debt put the money you had been paying to that onto the second smallest debt and pay that out.  Keep doing this until the only debt you have left is a mortgage (if you have that).

N.B. If you have a mortgage and a lot of credit card and personal debt it could be beneficial to refinance your mortgage to incorporate all these debts.  You would then only have one repayment (for the mortgage) but you could pay a lot more off your mortgage each week by using the money that was going on the other debts to pay down the mortgage.  Talk with you mortgage lender to see if this is possible for you.

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Example

Peter and Monique are working on their budget and have decided to focus on reducing debt as a matter of priority.  They sit down and list everything they owe:

• $160 – Monique’s sister
• $1450 – Credit Card (monthly payment is $30)
• $2520 – personal loan (monthly payment is $100)
• $254000 – mortgage

They have decided that they want to get rid of the debt as quickly as possible.  They cut up their credit card.  They start their debt journey by putting $50 per fortnight aside to pay Monique’s sister back.  In four fortnights they have paid her back.

This now frees up $50 to put towards the credit card debt.  They use a balance transfer for their credit card to get 0% for 14 months and pay the credit card minimum payment (set at 2% of the card limit so about $30 per month) PLUS the $50 per fortnight.  They will have the credit card paid off in about eleven months and now have $30 per month and $50 per fortnight available for the personal loan.

They put these amounts PLUS continue the minimum loan repayments for the personal loan so they are now putting $130 per month and $50 per fortnight to the personal loan.  In about another year they will have that paid off as well and be debt free except for their mortgage.  If they use lump sum payments such as a work bonus or a tax refund they can reduce their debt even faster.

They can then start putting the $130 per month and the $50 per fortnight into their mortgage which reduces the overall term of the mortgage.  They have set themselves up well by reducing their debt.

 One final point

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I really believe that getting rid of your credit cards is your first step towards financial freedom.  Credit cards by nature are designed to make you spend and the more you spend the more interest your lender is making from you.   A credit card is not your money, it’s the bank and you will have to pay it back.

It is much better to get yourself a Visa debit card that is offered by most banks these days.  Visa debit cards have the benefit of working like a credit card both in traditional brick and mortar shops and online but you are using your own money.

You can also purchase prepaid Visa cards now that allow you to put money on the card and use it like a normal credit card but again it’s your own money and there are no interest charges.  When you are using your own money you tend to think twice about spending on your card.

I won’t pretend to say it’s easy saving money on a low income.  It’s not.  However, it is very necessary.  Probably even more so than when you have a huge income.  When you are on a low income you have less disposable income which means less access to cash in an emergency.    Where would you get the money if you had an emergency?

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It would be lovely if we could all have $1000 to immediately put into a savings account for a rainy day but the reality is that would take many of us months to save up.  So here are my saving tips for low income families:

• Savings Jar – I have mentioned the savings jars that I have going previously.  Get an old coffee tin, rip off the label, put a 50c coin width size in the lid and then tape the lid on.  Drop in the coins even if it is just 5c and 10c coins to begin with, believe me they do add up.
  • Make it fun putting coins in the tin.  Make a deal with your family that every time a 50c coin comes into their possession they are not allowed to spend it.  It must go in the tin.  You won’t miss 50c and they quickly add up.  If you put just three 50c coins in the tin per week, in six months you would have $39.
    

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  • When the tin is full take it into the bank and transfer it to your savings account.

• Online Saving Account – Open an online saver account (I use ING but most banks offer these now) and transfer $10 every payday directly across.  If you can spare more then put more across.  I like online accounts as you have to transfer it to get access.  It means that you are more likely to leave it sitting there and only transfer it in a true emergency.

• At the end of each fortnight if you have any money left over from your budget for food or fuel etc. transfer it to your emergency account or put it in your tin.

Fast start to savings

• One way to get a lump sum into your emergency savings quickly is to speak with Centrelink for an advance payment.  Most people on payments e.g. Newstart, Pension will be eligible for a lump sum once per year.  If you receive FTB you can get two a year – in January and July – these can be set up automatically or you just ask when you want it.  You then pay it back over the next 13 fortnights (six months) out of your payment.  The benefits for setting up your emergency fund like this are:
  • For example if you receive a $500 advance payment you would be required to pay $38.46 per fortnight.  By getting an advance put straight into your emergency savings account you have the benefit of it sitting there earning interest.  You then become disciplined in not having that $38.46 per fortnight coming out of your payment so when you’ve repaid it you can then keep paying that amount each fortnight into the emergency savings account.
    

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Let’s look at this in real terms.  You set up the account with the initial advance of $500.

Advance Payment:    $500

Regular Payment:      $130 ($10/fn)

3 x 50c per week:       $  39

This would give you a total of $669 in six months!   Even if you just used the advance and the 50c coins you would have $539 saved in six months. Now if you continue to pay the $38.46 per fortnight that Centrelink was taking into that account you and added nothing else you would have $1039 in a year.

So little bits add up.  Coins add up.  It may take time but having savings means you have something to fall back on in the event of an emergency.  Happy saving!

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In Australia we are rapidly approaching the end of the financial year with just over a week until the 30th of June.  To maximise your return you need to ensure that you keep receipts for anything you wish to claim as if you can’t prove your expenses when the Australian Tax Office (ATO) comes knocking you could find yourself in a spot of bother.  A tax return is always a great way to get a lump sum of extra cash to use to put into your emergency savings fund or to pay down some debt.  The larger your return, the larger the dent you could put into a debt or the larger your emergency fund can be.

Finding Individual Tax Information

There is plenty of information on the ATO Individual’s Website but it can become confusing to find the information you need.  If you can’t find what you want don’t hesitate to call the ATO as I have always found them to be helpful in pointing you to the specific information you require.

Lodging your Return

There are many options for completing your tax return and online is becoming more popular each year.  This year the ATO is introducing a new online option called myTax that is designed for those people with basic, straightforward tax returns.  eTax is the stalwart of the ATO’s online tax lodgement that has been used by more and more people each year to complete their return.  I personally have used eTax for several years and find it very simple to complete and lodge and I usually have my return in my bank account within two weeks. I love the pre-fill function where eTax allows you to link your Medicare, Centrelink payments, bank accounts, Private Health etc to pre-fill the necessary information to complete your return.  If, however you aren’t comfortable lodging online you can always use the traditional paper tax return.  The ATO is trying to move away from the paper system to online services but for now the paper return still exists.

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Whilst the above makes completing your return very simple, some people really feel scared or confused about the entire tax system.  If you are really unsure about dealing with completing a return on your own you can employ a tax agent who will charge you for this service but it can be claimed as a deduction in the next year.  You can use the Tax Help program that sees volunteers assist people on low incomes to complete basic tax returns.  Finally,  you can ask a friend or family member to help you but remember you will have to sign it and you will be held responsible for the information contained within the return.

Remember, no matter which way you lodge your return, it needs to be lodged by 31st October in that year.  In some cases you can apply for an extension but you need to contact the ATO as soon as possible to discuss this.

Income

Any money you earn in a tax period is subject to income tax.  What you are required to pay is dependant on how much you earn.  If you are employed and earn a wage or salary, your employer will take tax from you and this will be shown each payday on your payslip.  The list of income that the ATO considers to be income for tax purposes includes (but is not limited to) the following:

• Employment income
• Pensions, annuities, and government payments
• Investment income
• Capital gains
• Business, partnership and trust income
• Foreign income

Deductions and Offsets

You can claim a variety of deductions and offsets to reduce your tax liability but it is imperative that you have receipts or log books to back up any claims.  Make sure that you have a system in place to keep all your receipts to make tax time easier.  A file with separate sections for each type of receipt is a simple way of keeping on top of the receipts or scan the receipt immediately and put it in a folder on your computer ready to go.  I personally scan each receipt as it comes in, put it in a folder on my computer, log it in a spreadsheet, and then file the paper copy into an envelope for those types of receipts and then put them in a folder for that financial year.  This makes doing tax at the end of the year very simple.

People are often confused about the difference between deductions and offsets.  The definitions from the ATO website:

You subtract these allowable deductions from your total income to arrive at your taxable income – you only pay tax on your taxable income.

Tax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable on your taxable income.

So basically what this means is that a deduction reduces your actual gross income.  So, for example, if your gross taxable income was $35432 for the year and you claimed deductions of $1203 then your new taxable income would be $34229 and you would pay tax based on this amount.  The tax on this would be $3045.32.  Now this is where your offsets come in, they reduce your tax payable so if you were to have $502 in offsets your total tax payable would become $2543.32.

Deductions include (but are not limited to):

• Vehicle and travel expenses
  

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• Clothing and laundry expenses
• Gifts and donations
• Home office expenses
• Tools and equipment
• Self-education expenses

Offsets include (but are not limited to):

• Medical expenses – this is being phased out over the next couple of years
• Health insurance
• Low income earners
• Superannuation

So hopefully you are feeling a little less confused about the fact that tax time is rapidly approaching and you can understand a little more of where to find information to complete your tax return.  Just remember to keep your receipts and have them organised to make completing your return much simpler.  Good luck in getting a good refund this year!

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