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 maximise tax time benefits.
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.
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:
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.
Although tax time is about income minus expenses, there are other things you can do throughout the year to help manage your tax effectively.
You could boost your super savings rather than just relying on your employer’s SG contributions.
But there are some things to be aware of too.
Everyone 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.
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.
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.
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.
Our daily routines have changed since COVID-19 and the ATO has stepped in to make it easier when claiming deductions that reflect the new working environment.
To streamline claiming a deduction for additional running costs while working from home, the ATO has introduced a simplified method so you can claim a flat rate of 80 cents per hour for all running expenses, rather than calculating an amount for each individual expense. Expenses include:
This simplified method applies for home office expenses incurred between 1 July 2020 to 30 June 2021. Of course, you can still calculate your actual running expenses if you prefer.
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.
If you took leave or were temporarily stood down due to COVID-19, your employer may have continued to pay you regularly (possibly through the JobKeeper scheme – note the JobKeeper scheme finished on 28 March 2021) or made a one-off payment. The ATO treats these payments in the same way as your income from your employer, so you must declare them as salary/wages on your tax return and you will pay tax on them at your marginal tax rate.
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.
Information current as a 9 June 2021.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
This information may contain material provided by third parties derived from sources believed to be accurate at its issue date.
Any tax considerations outlined in this document are general statements, based on an interpretation of current tax laws, and do not constitute tax advice. You should seek specific tax advice from a registered tax agent or registered tax (financial) adviser about any liabilities, obligations or claim entitlements that arise, or could arise, under taxation law. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any super law considerations or comments outlined above are general statements only, based on an interpretation of the current super laws, and do not constitute legal advice.
This publication has been prepared by BT - Part of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian credit licence 233714.