Counting down to June 30

It’s been a year of change like no other and that extends to tax and superannuation. As the end of the financial year approaches, now is a good time to check some new and not so new ways to reduce tax and boost your savings.

With so many of us confined to our homes over the past year, the big deductible item this year is likely to be working from home expenses.

Home office expenses

If you have been working from home, the Australian Taxation Office (ATO) has introduced a temporary shortcut method which can be used for the 2020-21 financial year. This allows you to claim 80c for each hour you worked from home during the year.i

The shortcut method covers the additional running costs for home expenses such as electricity, phone, internet, cleaning and the decline in value of home office furniture and equipment.

Some people may get a better result claiming the work-related portion of their actual working from home expenses using the actual cost method.

Alternatively, if you do have a dedicated home office, you can claim using the fixed rate method. The fixed rate is 52c an hour for every hour you work at home and covers things like gas and electricity, and the decline in value or repair of office furniture and furnishings. On top of this, you may be able to claim the work-related portion of phone and internet expenses, computer and stationery supplies, and the decline in value of your digital devices.ii

Pre-pay expenses

While COVID has changed many things, some things stay the same. Such as the potential benefits of pre-paying next year’s expenses to claim a tax deduction against this year’s income.

Some examples are pre-paying 12 months’ premiums for your income protection insurance and work-related expenses such as professional subscriptions and union fees. If you are unsure what you can claim, the ATO has a guide for a range of occupations.

If you own an investment property, you might also consider pre-paying 12 months’ interest on your loan and other property-related expenses.

Top up your super

If your super could do with a boost and you have cash to spare, now is the time to check whether you are making the most of the contribution strategies available to you.

You can make tax-deductible contributions up to $25,000 a year, including Super Guarantee payments by your employer. You can also contribute up to $100,000 a year after tax. From July 1 these caps will increase to $27,500 and $110,000 respectively, so it’s important to factor this into decisions you make before June 30.

For instance, if you recently received a windfall and are considering using the ‘bring forward’ rule, you might consider holding off until after July 1. This rule allows you to bring forward two years’ after-tax contributions. By holding off until July 1 you could contribute up to $330,000 under the new limits.

Also increasing on July 1 is the amount you can transfer from your super account into a pension account. The transfer balance cap is increasing from $1.6 million to $1.7 million.

So if you are about to retire and your super balance is close to the cap, it may be worth delaying until after June 30. Finally, from 1 July 2020, if you are under age 67 you can now make voluntary contributions without meeting a work test. And if 2020-21 is the first year that you no longer satisfy the work test, you may still be able to add to your super if you had a total super balance below $300,000 on 1 July 2020.


Manage investment gains and losses

Now is a good time to look at your portfolio for any loss-making investments with a view to selling before June 30. Any capital loss may potentially be used to offset some or all of your gains.

Of course, any decisions to buy or sell should fit with your overall investment strategy and not for tax reasons alone.

For all the challenges of the past year, there are still many ways to improve your overall financial situation. So get in touch with an Adviser on 03 5120 1400 to make the most of strategies available to you to before June 30.

https://www.ato.gov.au/general/covid-19/support-for-individuals-and-employees/employees-working-from-home

ii https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/home-office-expenses/

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Goal setting made easy with the H.A.R.D approach

Goal setting is one thing – achieving your goals is something else entirely. So what makes the difference between a goal that is achieved and one that falls by the wayside?

Research has shown that people who achieve their goals are more likely to do so because they create a vision of their future and are emotionally connected to their goals.i

Goal setting for the new year

This time of the year is often when we come up with goals, but despite positive intentions, we can easily lose sight of them.

There are different approaches to goal setting. SMART goals are often recommended as they’re more considered and measurable, as you follow specific steps in establishing your goal. However, they’re not fail-safe though – a leadership study found that people who set SMART goals are less likely to love their jobs, and only 14% of respondents believed their goals would help them achieve “great things.”ii The study found that many of us don’t strive for difficult goals, which is where HARD goals can help.

H.A.R.D goals

HARD goals connect your vision to your emotions and values, which then really push and challenge you to achieve great things. They comprise of four elements: Heartfelt, Animated, Required and Difficult.

Heartfelt

There’s no use setting a goal you have no connection with. For example, climbing the corporate ladder or buying a home, common goals for many of us, don’t resonate with everyone – if they don’t, you’re unlikely to strive to achieve them.

Instead, hone in on what truly matters to you and how you want to feel. If you have visions of a relaxed retirement, financial freedom at the end of your working life will motivate you. Or perhaps that entrepreneurial spirit wants to be set free to start your own venture. Whatever it is, ensure your goals align with your vision and focus on the outcome.

Animated

Whether you’re naturally a visual thinker or not, by animating your goal you are picturing exactly what it will look like. By visualising your goal, you’re making it real and building a deeper emotional connection to it.

If you want to grow your business, visualise customers walking in the door or travelling to a new destination to set up a new office. If you want to change careers, see yourself in that field, talking to your new co-workers and learning the skills you will need. This image will provide ongoing motivation and will drive to achieve your outcome.

Required

This element reduces the risk of procrastination, as you’ll be clearer as to why you need to meet this goal. For instance, you might set a goal around doing further training, setting specific courses to complete in the year, in order to progress your career.

You can explore what is required to achieve your goal by considering if it would happen should you not meet it. For example, if you plan on running a marathon, clearly a running schedule and fitness regime is necessary in order to meet your ultimate goal.

Difficult

Just as the name suggests, HARD goals aren’t meant to be easy – and you’ll get greater satisfaction meeting difficult goals. Identify what it is you want to do but are hesitant about in case you fail, or perhaps even if you succeed!

While you don’t want to create goals so difficult they’ll be impossible to reach, you want them to be a challenge and of great importance to you. Perhaps it will be learning a new language, when you’re not much of a linguist, in order to apply for that job overseas, or to work your way to the top position in your company by taking on more responsibilities.

At the basis of all goals is a desire for change. Picture the future you want and then work steadily towards it.

As many goals are financial, get in touch with our team on 03 5120 1400 if you need support with your finances or for advice on how to make these goals possible.

https://www.researchgate.net/publication/232822271

ii https://www.leadershipiq.com/blogs/leadershipiq/35353793-are-smart-goals-dumb

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.