The end of the financial year is just around the corner and many people are starting to think about what they can do to maximise their tax return.
While working-from-home expenses are on the rise, the Australian Taxation Office (ATO) is keeping an eye on claims like refinanced kitchen renovations and personal travel arrangements.
And if you are still in WFH mode, you’re likely already across the 80 cents per hour shortcut method of claiming.
Here are seven key things to ask yourself if you’re just sorting it all out now.
I’m working from home. Should I rush out and buy office equipment?
First, think about what you’re going to be using it for.
Put simply, any equipment you buy must be at least partly used for work purposes (so that new kitchen table you work from won’t fly with the ATO).
If you’re buying equipment like a printer, computer or phone, you’ll need to calculate the percentage of time it’s used for work and claim accordingly.
And you have to be careful not to claim for things that have already been paid for by work, explains senior tax advocate Susan Franks from Chartered Accountants ANZ.
“For example, if your employer reimburses your work-related phone expenses, then you cannot claim those expenses as a deduction in your tax return,” she says.
“And while your employer may supply coffee and tea at the office, you can’t claim for coffee or tea bought whilst working from home.”
Should I put more money into my super?
Topping up your super account with a one-off, after-tax contribution can be a great way of reducing your taxable income.
It can be helpful for higher-income earners and people skating close to income thresholds for things such as the childcare subsidy.
But be aware that it’s not a quick process and many super funds have deadlines for you to make a contribution that are well before June 30.
It could be too late, so check with your super fund to make sure your contribution will be deducted from your 2020-21 income.
“Some people get caught out – they’ll make the payment before June 30 but not realise it has not been processed in time,” says Elinor Kasapidis, senior manager of tax policy at CPA Australia.
There are also limits on how much you can contribute to your super fund each financial year without having to pay extra tax.
“If you make a contribution, you’ll also need to complete a notice of intent with your super fund and receive their acknowledgement before you lodge your tax return in order to claim the deduction,” Ms Kasapidis says.
This document can be completed after June 30 when you do your tax return.
Low-income earners can also take advantage of the federal government’s super co-contribution payment, which helps people who earn less than $54,837 save for their retirement.
“If you’re eligible and you make personal super contributions, the government may match your contribution up to a maximum of $500, provided you have not claimed your contribution as a tax deduction,” Ms Franks says.
I’ve just started investing, what do I need to think about?
Some people choose to sell loss-making shares before the end of financial year to minimise any taxable profits they have made on selling shares.
The way the ATO approaches shares depends on whether you are a share trader or a casual investor.
It’s important to note that profits on shares are not taxable until you actually sell them, while shares you have held onto for longer than a year before selling are only taxed at 50 per cent of the profits.
And if you are a casual investor and sell your shares, you must pay tax on the total profits minus total losses.
Another thing to remember is that while the costs of buying or selling shares is not an allowable deduction against income, it is taken into account in determining the amount of any capital gain.
“If you have generated a capital gain during the year, and you are thinking about selling some shares at a loss, do it before the end of the year so you can offset the capital gain,” Ms Franks says.
She says it’s important to keep good records about brokerage fees and the other costs of keeping those shares.
On top of that, you’ll also need to pay tax on dividends you receive from shares you have not sold.
Similar rules apply for cryptocurrency.
What about donating to charities?
If you want to reduce your taxable income and feel good at the same time, you could consider making a tax-deductible donation to a charity.
A word of warning though – the organisation must be a deductible gift recipient (DGR) or fund that registers to receive tax-deductible gifts.
For example, crowdfunding websites raising money for good causes are not always run by DGRs, therefore donations to those campaigns and platforms aren’t deductible.
You can see if a charity is a DGR here.
Should I consider income protection?
You can claim for this, but there’s a catch.
The ATO only allows you to deduct the costs of your income protection premiums for policies that are not part of your super package.
So, if your income protection is part of your super package and not through a separate insurer, it is not tax deductible.
What about a new car?
You may have already heard about instant asset write-off. It’s a tax perk that applies to businesses, but not individuals.
But here’s the long and short of it: Unless you are an eligible business and the car is used for business purposes, the answer is a resounding no.
So before you even start thinking about going down this road (excuse the pun), Ms Franks has some pretty simple advice.
“A fail-safe way to make sure you don’t make a mistake and claim something you cannot deduct is to check with an accountant first,” Ms Franks says.
Help! What if I’m reading this too late?
Don’t panic – many of us aren’t on top of our tax stuff.
But if you want to maximise your deductions in the future, experts say we need to check in on our affairs regularly.
“If you missed out this year, learn from that and set yourself up better for the following year to take the biggest advantage of what is available to you,” Ms Kasapidis explains.
Pretty simple stuff.
Disclaimer: This is general information. If you need individual advice, please seek out a professional.
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