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Tax deductions misconceptions

Wrongly claiming tax deductions can result in heavy penalties from the tax office. Despite this, many Australian taxpayers continue to attempt claiming invalid tax deductions that are rejected by the tax office. While some are not quite so obvious, below are some common misconceptions about deductions that many taxpayers believe.

Driver’s licence: While claiming deductions for vehicle expenses such as repairs and servicing is allowed, claiming for the cost of a standard driving licence is not.

Vaccinations: Vaccinations against the diseases an employee may be in contact with due to work are not tax deductible

Childcare: Claiming deductions on the expenses paid to have someone care for your children during work hours is not viable, even when this is necessary for a person’s career advancement.

Commuting to work: Although certain circumstances, such as picking up or delivering heavy equipment, can allow a deduction, general travel between home and work does not.

Relocation expenses: The costs associated with changing employment, such as moving house or meeting an employment agreement are not deductible. This is because the expenses are often regarded as being incurred by gaining an assessable income.

Posted on 29 July '15 by , under Tax.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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