With the end of the financial year creeping towards us, you should be thinking about your tax.
Here are five things you can do between now and 30 June that could help you maximise your tax refund.
Get your paperwork in order
Locate any paperwork you need to prepare your tax return. This includes bank statements, statements relating to investments in shares or ETFs, records from any investment properties, and receipts for donations, medical expenses or work-related expenses.
Read more: COVID-related tax deductions explained
If you have been working from home, you may be eligible for extra tax deductions.
The ATO introduced a shortcut method to claim a deduction of 80 cents for each hour you worked from home over the 2020-2021 financial year.
To claim the shortcut method, you must keep a record of the hours you have worked from home. This could be a timesheet, roster or diary.
If you have a dedicated work area, such as a home office, you may be better off using the fixed-rate method.
The fixed-rate is 52 cents for each hour you work from home and you must keep a record of the actual hours spent working at home for the year or a diary for a representative four-week period to show your usual pattern of working at home.
You may be able to claim for the work-related proportions of household costs such as heating, cooling and lighting bills, phone and internet expenses, and the depreciation of office equipment and furniture – including computers and printers.
If you are expecting your income to be lower in the next financial year, pay any expenses that may attract a tax deduction before 30 June.
Some examples include the premium for your income protection insurance, charity donations and work-related expenses.
The ATO has provided guidelines on which work-related expenses you can claim across a range of occupations.
To claim a deduction for work-related expenses you must have spent the money and not been reimbursed, and the expense must directly relate to earning your income. And, if your total claim for work-related expenses is more than $300, you must have written evidence such as a receipt to prove it.
If you are confident you’re getting a good rate on your investment property loan, you may consider prepaying next year’s interest so that you can claim a deduction this year. In essence, this means you’re locking in your interest rate for the next year.
Top up your super
There are a number of perks that may come with making a contribution to your super. If you earn less than $54,837 and add money into your super fund, then the government may also make a super co-contribution up to a maximum amount of $500.
The co-contribution amount depends on your income and how much you contribute. To get the maximum co-contribution of $500, your income must be $39,837 or less and you need to make a contribution of $1000. If your income is between $39,837 and $54,837, your maximum entitlement will reduce progressively as your income rises. The money needs to be in your super fund by 30 June to be eligible for a co-contribution for this financial year.
Buy an asset for your business
If you need to buy an asset for your business, such as a car or office equipment, you may be able to claim an immediate deduction.
According to an ATO spokesperson, from 6 October 2020 to 30 June 2022 eligible businesses can claim an immediate deduction for the business portion of the cost of eligible assets under temporary full expensing.
“Under temporary full expensing an immediate deduction is available for the business portion of the cost of new eligible depreciating assets (or improvements to existing assets) for businesses with an aggregated turnover under $5 billion or for corporate tax entities that satisfy the alternative income test and/or the business portion of the cost of eligible second-hand assets for businesses with an aggregated turnover under $50 million,” explained the spokesperson.
“Unlike the instant asset write-off, there is no general limit on the cost of eligible assets to which businesses can apply temporary full expensing. Therefore, regardless of how much an eligible asset costs an eligible business can claim an immediate deduction for the business portion of the asset’s cost. However, businesses must reduce the deduction to the extent they use the asset for a non-taxable purpose (for example, private use) and specific cost limits apply on certain assets such as passenger vehicles to which the car limit may apply.”
Manage your capital gains and losses
If you have made a capital gain from selling assets this year – whether that is property, shares or ETFs – you may want to look at your portfolio for any underperforming investments. Selling underperforming investments could offset some or all of the gain.
It’s important to look at the big picture and not sell any assets simply for tax purposes though.
It’s also worth noting that you can’t just buy the shares you have sold for a loss again in July, as this is likely to be considered a tax-avoidance strategy by the ATO.
Are you ready for the end of the financial year?
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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.