An EOFY checklist – what you need to know

As the end of another tax year rapidly approaches on 30 June, we’ve put together an End of Financial Year checklist to help you get the most from tax time benefits.

How you can prepare

Don’t put your Tax Return into the ‘too hard basket’. You could enjoy an End of Financial Year cash boost if you know what to include and how to maximise any work-related deductions.

Income

Many people don’t realise their income isn’t necessarily just what they earn from their employer. Consider if any of the following apply to you:

• Salary/wages
• Lump sum/termination payments
• Bank interest
• Dividends
• Employee share schemes
• Managed Funds income
• Rental property income
• Foreign income
• Capital gains
• Cryptocurrency gains.

Deductions

No doubt the most confusing and contentious area of tax returns. This could include expenses you’ve incurred and haven’t been reimbursed for which may reduce your tax liability.

• Work-related deductions
• Home office expenses
• Self-education and professional development
• Registrations, subscriptions, memberships
• Vehicle and travel expenses
• Protective clothing, laundry and dry-cleaning expenses
• Tools and equipment, including depreciable assets (such as laptops)
• Accountant or tax agent fees
• Personal super contributions
• Investment income expenses, such as margin loans and financial adviser fees
• Income protection insurance premiums
• Donations.

You can find more information about deductions on the Australian Taxation Office (ATO) website.

Ways to reduce your tax bill

Although tax time is about income minus expenses, there are other things you can do throughout the year to help manage your tax effectively.

Get your super in order

You could boost your super savings rather than just relying on your employer’s Super Guarantee (SG) contributions.

• Personal super contributions: you may be eligible to claim a tax deduction for your personal contributions up to the $27,500* (2023/24) concessional contributions cap, but be aware that this cap is for all concessional contributions and includes employer contributions as well. You may also be eligible to make additional personal contributions from your after-tax salary up to the non-concessional contributions cap. 
  
  *Your cap may be higher if you have unused concessional contribution cap amounts.
  
  
• Co-contributions: low or middle-income earners that make personal super contributions may receive a government co-contribution, up to a maximum $500.
• Employee salary sacrifice: an agreement with your employer to give up part of your salary (thereby reducing your taxable income) and investing it into super to boost your retirement savings.
• Spouse contributions: a tax rebate (maximum $540) may be available for after-tax contributions to super on behalf of a low-income spouse.

But there are some things to be aware of too.

• Timing: contributions must be in your super account before 30 June or they will be counted against the next financial year’s limits.
• Concessional contribution cap: concessional contributions (employer SG, salary sacrifice and personal contributions for which you have claimed a deduction) cannot exceed $27,500* (2023/24). If you contribute more than this amount, you may have to pay extra tax.
  *Your cap may be higher if you have unused concessional contribution cap amounts.
• If you’re aged between 67-74, you won’t need to satisfy the ‘work test’ before making non-concessional contributions and salary sacrifice contributions to your superannuation. However, if you want to claim a tax deduction on your personal contribution, you’ll still need to satisfy the work test requirement.
• If you want to claim deductions for your personal contributions, you need to provide a valid 'notice of intent to claim a deduction for personal superannuation contributions' to your super fund and have received written acknowledgement. 

Understand additional levies

Taxpayers pays the Medicare levy (2% of taxable income) to help fund Australia's public health system.

You may also have to pay the Medicare levy surcharge if you don’t have an appropriate level of private health insurance and your income is above a certain level.

However, it’s worth reviewing the pros and cons of private health insurance, as you might also find you’re eligible for the private health insurance rebate, which is an amount the government contributes towards the cost of your premiums.

Be an organised landlord

Make sure you have the annual tax statement from your property’s managing agent, plus details of any expenses you’ve paid personally, like land tax, strata, insurance or mortgage interest.

If you made any capital improvements, keep the receipts for any depreciable items. And if you bought or sold a property, keep copies of the sales contract, settlement sheet and other associated costs.

It can also be useful to have a depreciation schedule for your property. It shows the deductions for the depreciation of the building structure and the items within and can deliver significant savings at tax time.

Offset a capital gain             

If you realise a capital gain from an investment during the year, you could consider offsetting this by selling a poorly performing investment that no longer suits your needs. This would trigger a capital loss, which could reduce your tax payable, as well as potentially releasing money to invest in new investment opportunities.

Prepay investment loans     

If you have a geared asset like a rental property, and you have capital to inject, some lenders may allow you to prepay 12 months interest on your investment loan. This will effectively bring forward your tax deduction into the current year and could help offset any capital gains or additional income you’ve earned.

Working from home expenses

Our daily routines have changed for many people since COVID-19 and the ATO has stepped in to make it easier when claiming deductions that reflect the new working environment.

Home office expenses

To streamline claiming a deduction for additional running costs while working from home, the ATO has revised the method for the 2022/23 and following financial years so you can claim a flat rate of 67 cents per hour for some running expenses, rather than calculating an amount for each individual expense. Expenses include:

• Phone and internet
• Cost of heating, cooling and lighting the work area
• Printing and stationery

Of course, you can still calculate your actual running expenses if you prefer.

As with most deductions:

• You must have spent the money
• The expense must be directly related to earning your income
• You must keep a record to prove it.

If you use the simplified method, you should keep a record of the hours you worked at home using timesheets or diary notes.

If you received an allowance from your employer to cover your expenses when working from home, you must include this as income in your tax return and claim a deduction as outlined above. 

Find out more about working from home deductions on the ATO website.

Plan for the future

• End of Financial Year is a great time to assess your current financial situation.
• Do you expect anything to change in the next 12 months?
• Did you get a tax refund that you could use to grow your wealth or pay down other debts?
• Should you have put more money aside to pay your tax liability?

The good news is, we have an End of Financial Year every year, so you can always apply any lessons learned. An Accountant or Tax Agent can help you plan ahead, research your options for tax efficiency and try to maximise the amount of money you get back.