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.

End of Financial Year checklist

Person writing in notebook with the text 'end of financial year checklist'

It always takes some planning to get your finances in order for the end of financial year, and this year may look a little different, come June 30. The COVID-19 pandemic may have impacted your circumstances and therefore your situation could be looking different to normal. 

Perhaps you have been working from home, your wages may have reduced or been boosted by government payment support, or you have had to make major financial decisions as a result. 

Here are things to consider to ensure you’re on the front foot come June 30. 

Working from home deductions

Whether you’re used to working from a home office or have been forced to due to COVID-19, it’s good to be across what you can claim on tax. 

Given that working from home is a new situation for many, the Australian Taxation Office has made it easier to claim deductions. You won’t have to submit a detailed logbook, as you can now claim a deduction of 80 cents for each hour you work from home due to COVID-19. Therefore you only need to keep track of the hours you work from home, along with proof of your expenses. 

There are a couple of provisos with this ‘shortcut method’: the work needs to be fulfilling your employment duties (not simply checking your email every now and then) and you must have incurred additional deductible running expenses as a result of working from home. These home deductions must be directly related to earning your income – as tempting as it is to claim Netflix as a research tool, unless you’re a television critic this is unlikely to fly! 

You need to keep records of your expenses and be able to show that you, not your employer, has paid for them. You must also include any allowance you receive from your employer as income on your tax return. Be mindful that the ‘shortcut’ method may not be the best for your circumstances and it may be worthwhile, if a little more laborious, sticking to the old method. For more information on working from home deductions, visit the ATO’s website

Boosting your super

While the COVID-19 situation has seen some dipping into their superannuation, if you’re able to, it’s always a smart idea to use the end of financial year to give your super a bit of a boost as even the smallest amount can really add up over time. 

There are many ways of growing your super to think about, including; 

Making tax deductible contributions:

  • Salary sacrificing up to your $25,000 annual cap.
  • The low income super tax offset is available to those who earn $37,000 or less a year, and means that if you or your employer contribute to your super, you may be eligible for a tax offset of up to $500 per year.
  • The spouse contributions tax offset means you may be able to claim an 18% offset (maximum of $540 offset) on contributions up to $3000, that you make on behalf of your non-working or low-income-earning partner.
Bring forward expenses

If you are in a position to do so, bring forward any expenses and delay income. This may not be possible for many businesses and individuals in the current climate, but it’s worth keeping in mind if this is an option for you. 

Working from home may have made you realise you need to upgrade your home computer or invest in better office furniture. Making your purchases before the end of the tax year will not only impact your return sooner rather than later, but you can take advantage of EOFY sales. 

Clear the decks

With some tough times ahead on the economic front, it’s is a good time to evaluate your income and expenditure. Now is the perfect time to look at your insurances, utilities and seek out any no longer relevant expenses to see what you can cut back on. 

It’s a bit of a different environment for end of financial year this year, if we can do anything to make things easier for you please get in touch with your Accountant/Financial Adviser on 03 5120 1400.

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.