income tax return, money management

* Updated for EOFY 2020 *

End of the financial year (EOFY) is an important time, not just for small businesses, but also the individuals.

Putting the hard work in each financial year can help you get your personal professional life organised so that you get to kick start the new financial year set up right and working smarter all year long.

Here are some essential reminders for your EOFY tax returns as individuals…

1. Bring forward deductions

Taxpayers who own an investment property or have an investment portfolio margin loan may consider prepaying interest up to 12 months in advance on investment loans and claiming a deduction for the prepayment.

2. Motor vehicle claims

If you frequently use your own vehicle for work related travel, a logbook may increase your motor vehicle deduction.

A logbook must be kept for 12 consecutive weeks and must be updated every five years or whenever your vehicle use materially changes.

In addition to maintaining a logbook ensure you keep written evidence of all motor vehicle expenses such as insurance, services, license and registration paid during the financial year.

No logbook? That’s ok – however, the maximum kilometres an employee will be entitled to claim is 5,000 kilometres at a rate of 68 cents.

IMPORTANT: in most cases, home to work travel is not included as work related.

3. Donations

A donation to a Deductible Gift Recipient (DGR) may be a great way to reduce your taxable income while contributing to a good cause. If you intend to make a donation prior to 30 June 2019, ensure that the donation is made to a DGR and that you maintain the receipt.

A list of DGRs are available on the ATO’s website.

4. Income protection policy

If your income protection policy is owned by you personally it is an income tax deduction in your individual tax return.

It may be wise talking to your financial advisor about your income protection policy being in your personal name instead of your superannuation fund to result in a personal tax deduction.

In addition, to increase your deduction it may be beneficial to pay your policy annually prior to year-end instead of monthly.

5. Managing capital gains exposure

You may consider reviewing any capital gains made during the financial year. If you have had a capital gains tax event during the year, evaluate any other assets you hold that are in a loss position and consider if it is an appropriate time to sell these to reduce your capital gains tax exposure.

Be aware that individuals have access to the 50% capital gain concession if they hold an asset for more than 12 months.

6. Superannuation contributions – Concessional contributions

Just before the financial year end is a great time to do a financial check of your funds and if you have any excess cash it might be worthwhile investing in your retirement and topping up your superannuation fund.

Any concessional contributions made into your superannuation fund up to the cap of $25,000 is an income tax deduction against your assessable income. Since 1 July 2017 you are now able to make concessional contributions to your superannuation fund regardless of how your income was received.

This means even if you are not self-employed you can still make an eligible concessional contribution and have the amount deductible in your tax return.

However, if you are over 65 and under 75 you must still satisfy the “work test”. This requires that you are employed and undertaking paid work for a minimum of 40 hours in any 30 consecutive day period to make voluntary contributions.

The annual concessional contributions cap is now $25,000 for all individuals.

For those with a super balance of less than $500,000 at the end of June 30 in the previous year, the new rules allow you to carry forward your unused concessional contributions cap amounts from 1 July 2018. The first year in which you can increase your concessional contributions cap by the amount of unused cap is 2019–20. Unused amounts are available for a maximum of five years and expire after this.

If you have had more than one job during the financial year you should make sure that you have not exceeded your concessional contribution cap as excess contribution amounts will be taxed at the marginal tax rate plus an excess concessional contributions charge. To claim a deduction for superannuation contributions in your income tax return you must provide a signed notice (Section 290-170 notice) to your superannuation fund to notify them of your intention. You must receive an acknowledgement notice from the fund confirming your contribution, prior to the lodgement of your individual income tax return.

7. COVID-19 Early Release of Super

If you have been financially affected by COVID-19, you may be able to access some of your superannuation early.

Eligible citizens and permanent residents of Australia or New Zealand can:

  • apply for up to $10,000 in 2019–20, and
  • apply again for up to a further $10,000 in 2020–21.

Eligible temporary residents can apply once to access up to $10,000 of super in 2019–20.

Applications can be submitted online through myGov:

  • until 30 June 2020 for the 2019–20 year
  • between 1 July 2020 and 24 September 2020, for the 2020–21 year.

You will not need to pay tax on amounts released and will not need to include these amounts in your tax return.

8. Division 293 tax on superannuation contributions

Individuals with an adjusted taxable income over $250,000 will be subject to an additional 15% tax on their taxable superannuation contributions. This amount has reduced from prior years’ threshold of $300,000, so we have found this impacts a lot more people than it used to!

Medicare levy surcharge Singles and families who do not have adequate private health insurance cover will be liable for the Medicare levy surcharge. This is determined by the income thresholds, set out in the table below.

Medicare Levy

Note: The family income threshold is increased by $1,500 for each dependent child after the first child.

This is an easy one – Ensure you have appropriate private health insurance going forward to avoid paying the Medicare levy surcharge.

9. Working from Home

Working from home is a lot more common these days and especially in recent COVID lockdown almost everyone was working from home.

If you have been working from home, you may have expenses you can claim a deduction for at tax time.

The ATO have brought in a higher fixed rate from 1 March – 30 June 2020 to simplify calculating your claim.  The ATO may extend this period depending on when working patterns fully return to normal.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

For more detailed information see the ATO website, but as an employee the rates are:

  • Pre 1 March 52c/hour
  • 1 March – 30 June 80c/hour

If you have had to buy specific items for working from home then make sure you keep these receipts and you can claim them either outright if below $300 or over a couple of years if more than $300.

As always, if you are unsure please speak to your tax advisor or Contact Us Today to go over your options in detail. It’s your money after all.