Do you know which tax deductions and offsets you might be eligible this financial year? The following tips may help you to get the best tax refund from your 2019-20 return.
There is so much information being pre-filled into your tax return, it’s best to wait until all the data is finalised before lodging, which can take up until mid-August.
Check that your income statement from your employer says ‘tax ready’ and your private health insurance, dividend and interest information is available to avoid lodging your return with unfinalised data and then needing to amend your tax return and pay additional tax.
DECLARE YOUR INCOME
Your income statement will show as ‘tax ready’ when finalised by your employer. Employers need to make a finalisation declaration by 14 July if they have 20 or more employees, or by 31 July if they have 19 or fewer employees.
JobKeeper payments are treated the same as your usual salary or wages from your employer. If you receive JobKeeper as an employee, it will be included on your income statement as either salary and wages or as an allowance, depending on your circumstances.
JobSeeker payments will be included automatically by the ATO in your tax return by the end of July as a separate government payment.
You also need to include income protection, sickness or accident insurance payments, redundancy payments and accrued leave payments in your tax return.
If you take leave, are temporarily stood down or lose your job and receive a payment from your employer, different tax rules may to these payments.
If you have received access to your superannuation due to COVID-19, you will not need to pay tax on these amounts and will not need to include these amounts in your tax return.
REPORT INCOME AND EXPENSES FROM THE CASH OR ONLINE ECONOMY
It is common these days for people to do odd jobs, rent out a room in your house, run a social media account or sell products online. You need to work out if this is a hobby or a business for tax and other purposes. If you decide you are running a business, the tax and other obligations start and your income from the activity may be assessable and your expenses deductible.
The ATO is receiving data from a range of websites including AirTasker, Uber, AirBnb and eBay which is matched against your tax return so you need to make sure you keep records and report correctly.
CLAIM YOUR EXPENSES
Work-related deductions
Claiming all work-related deduction entitlements may save you a lot of tax. These include employment-related mobile phone, internet usage, computer repairs, union fees and professional subscriptions that you paid directly and were not reimbursed by your employer.
The ATO continues to check work-related expense claims and due to COVID-19 expects to see a substantial increase in deductions for working from home or protective items required for work, and a reduction in claims for laundry expenses or travel expenses. Note you cannot claim the cost of travelling to and from work and working from home as a result of COVID-19.
If your usual pattern of work has changed during the year due to COVID-19 or other circumstances, you may need to complete additional records for the period your work pattern changed.
For an expense to qualify:
you must have spent the money yourself and weren't reimbursed by your employer
it must directly relate to earning your income, and
you must have a record to prove it.
Work from home and home office expenses
When you are an employee who regularly works from home and part of your home has been set aside primarily or exclusively for the purpose of work, a home office deduction may be allowable, for costs like heating, cooling, lighting and office equipment depreciation.
A new shortcut method for working from home claims has been announced by the ATO between 1 March 2020 and 30 June 2020 (and recently extended to 30 September 2020), allowing you to claim a deduction of 80 cents per hour for working from home. This method can be use if:
your employment duties are being performed from home, so not just carrying out minimal tasks like occasionally checking emails or taking calls, and
as a result of working from home, you have incurred additional running expenses.
You are not required to have a dedicated work area if you use the shortcut method but note that if this method is used, for that period, no other expenses for working from home can be claimed.
You must keep a record of the number of hours you have worked from home such as a timesheet, roster, diary, or similar document that sets out the hours you worked.
If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.
Self-education expenses
Self-education expenses can be claimed provided the study is directly related to either maintaining or improving current occupational skills or is likely to increase income from your current employment. If you obtain new qualifications in a different field through study, the expenses incurred are not tax deductible.
Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers.
Higher Education Loan Program (HELP) repayments are not deductible. You must also disallow $250 of self-education expenses, which can include non-deductible amounts such as child-care costs.
Motor vehicle deductions
If you use your motor vehicle for work-related travel, there are two choices of how you can claim. If the annual travel claim does not exceed 5000 kilometres, you can claim a deduction for your vehicle expenses on the cents-per-kilometre basis. This figure includes all your vehicle running expenses, including depreciation.
The allowable rate for such claims changes annually. It is 68 cents per km for 2019–20 and 72 cents per km for 2020–21.
You do not need written evidence to show how many kilometres you have travelled, but the ATO and therefore your tax agent may ask you to show how you worked out your business kilometres. The ATO has flagged concerns that taxpayers are automatically claiming the 5000-kilometre limit regardless of the actual amount travelled.
If your business travel exceeds 5000 kilometres, you must use the log book method to claim a deduction for your total car-running expenses.
Depreciation
Immediate deductions can be claimed for assets that cost under $300 to the extent the asset is used to generate income. Such assets may include tools for tradespeople, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord.
Assets costing $300 or more that are used for an income producing purpose can be written off over a period of time as a tax deduction.
The amount of the deduction is generally determined by the asset’s value, its effective life and the extent to which you use it for income-producing purposes.
Donations
The ATO will pre-fill your tax return with the gifts and donations information they have received. Make sure to add in any donations not included where the receipt shows your donation is tax deductible.
If you made donations to an approved organisation through workplace-giving, you still need to record the total amount of your donations at this item.
Your payment summary, or other written statement from your employer showing the donated amount, is sufficient evidence to support your claim. You do not need to have a receipt.
Claim a tax deduction for your superannuation contributions
Claiming a tax deduction for personal superannuation contributions is no longer restricted to the self-employed. The rules changed on 1 July 2017 and anyone under the age of 75 will be able to claim contributions made from their after-tax income to a complying superannuation fund as fully tax deductible in the 2018-19 tax year.
Any contributions you claim a deduction on will count towards your concessional contribution cap. Such a deduction cannot increase or create a tax loss to be carried forward.
If you’re aged 65 or over, you will have to satisfy the work test to contribute and if you’re under 18 at 30 June you can only claim the deduction if you earned income as an employee or business owner. Other eligibility criteria apply.
To claim the deduction, you will first need to lodge a Notice of intent to claim or vary a deduction for personal contributions form with your superannuation fund by the earlier of the day you lodge your tax return or the end of the following income year.
SUPERANNUATION
Superannuation contribution limits
Watch your superannuation contribution limits. You may wish to consider maximising your concessional or non-concessional contributions before the end of the financial year but keep in mind the contribution caps were reduced to $25,000 from 1 July 2017.
Concessional contributions include any contributions made by your employer, salary sacrificed amounts and personal contributions claimed as a tax deduction by self-employed or substantially self-employed persons.
If you're making extra contributions to your super, and breach the concessional cap, the excess contributions over the cap will be taxed at your marginal tax rate, although you can have the excess contribution refunded from your super fund.
Similarly, the annual non-concessional (post-tax) contributions cap is only $100,000 and the three-year bring forward provision is $300,000. Individuals with a balance of $1.6 million or more are no longer eligible to make non-concessional contributions.
High-income earners are also reminded that the contributions tax on concessional contributions is effectively doubled from the normal 15 per cent rate to 30 per cent if their combined income plus concessional contributions exceeds $250,000.
Importantly, don't leave it until 30 June to make your contributions as your super fund may not receive the contribution in time and it will count towards next year's contribution caps, which could result in excess contributions and an unexpected tax bill.
Consider the superannuation co-contribution
An individual likely to earn less than $53,564 in the 2019-20 tax year should consider making after-tax contributions to their superannuation to qualify for the superannuation co-contribution if their circumstances permit.
The government will match after-tax contributions 50 cents for each dollar contributed up to a maximum of $500 for a person earning up to $38,564. The maximum then gradually reduces for every dollar of total income over $38,564 reducing to nil at $53,564. You should consult a licensed financial planner about making superannuation contributions.
CONSIDER SALARY SACRIFICE ARRANGEMENTS
You may wish to review your remuneration arrangements with your employer and forego future gross salary in return for receiving exempt or concessionally taxed fringe benefits and/or making additional superannuation contributions under a valid salary sacrifice arrangement.
You should consult a licensed financial planner to consider the merits of exploring these options.
FIRST HOME SUPER SAVER SCHEME
The First Home Super Saver (FHSS) Scheme allows you to save money faster for your first home with the concessional tax treatment of super. You can make additional voluntary salary sacrificed superannuation contributions up to $15,000 per year (and $30,000 in total) into your complying superannuation fund which can be withdrawn to help finance a first home deposit.
Compulsory superannuation employer contributions and contributions in respect of defined benefit funds are not eligible for the FHSS scheme. Various other eligibility conditions must be satisfied.
MAXIMISE TAX OFFSETS
Tax offsets directly reduce your tax payable and can add up to a sizeable amount. Eligibility for tax offsets generally depends on your income, family circumstances and conditions for particular offsets.
Tax offsets you may be eligible for include, amongst others, the low and middle-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse.
From 1 July 2019, the tax offset for net medical expenses for disability aids, attendant care or aged care is no longer available.
BE CAREFUL OF SCAMS AND PROTECT YOUR IDENTITY
There has been a significant increase in Australians being targeted with COVID-19 scams, fraud attempts and deceptive email and SMS schemes. If you’re unsure whether an ATO interaction is genuine, do not reply. If you receive an SMS or email claiming to be from the ATO, check with the ATO first to confirm it's genuine.
During this time of heightened scam activity, the ATO encourages individuals to:
run the latest software updates to ensure operating systems security is current
update antivirus software
always exercise caution when clicking on links and providing personal identifying information
never share personal information on social media, such as your TFN, myGov or bank account details.
avoid accessing online government services via a hyperlink in an email or SMS – only via an independent search
always access the ATO’s online services directly via ato.gov.au or my.gov.au or the ATO app
call the ATO on an independently sourced number to verify an interaction if in doubt
don't click on a link, open an attachment or download a file if in doubt.
Thieves only need some basic details such as name, date of birth, address, myGov details, or tax file number (TFN) to commit identity crime. If criminals steal your identity, it can take a long time to fix. It may be difficult for you to get a job, a loan, rent a house, or apply for government services or benefits.
Ensure your digital identity, such as your myGovID, is secure. Your digital identity is unique to you and shouldn’t be shared, as this will enable others access to your personal data across services such as tax and health.
If you suspect your TFN or ABN has been stolen, misused or compromised, phone the ATO as soon as possible on 1800 467 033 between 8.00am and 6.00pm Monday – Friday so they can investigate and place additional protective measures on your account.
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