The time to file income tax is upon us What to think about before the end of the fiscal year?
The end of the fiscal year is fast approaching and many people are starting to think about what they can do to maximize their tax return.
As expenses related to working from home are on the rise, the Australian Tax Office (ATO) is monitoring claims such as refinanced kitchen renovations and personal travel arrangements.
And if you’re still in WFH mode, you’re probably already on the 80 cents per hour shortcut method of claiming.
Here are seven key things to ask yourself if you’re fixing it all right now.
I work from home. Do I have to hurry to buy office equipment?
First, think about what you are going to use it for.
Simply put, any equipment you buy should be at least partially used for business purposes (so the new kitchen table you’re working from won’t fly with the ATO).
If you are purchasing hardware such as a printer, computer, or phone, you will need to calculate the percentage of time it is used for work and claim accordingly.
And you have to be careful not claiming things that have already been paid for by worksays Susan Franks, Senior Tax Lawyer, Chartered Accountants ANZ.
âFor example, if your employer reimburses your work-related telephone expenses, you cannot deduct those expenses as a deduction on your tax return,â she says.
“And although your employer may provide coffee and tea in the office, you cannot claim coffee or tea purchased while working from home.”
Should I put more money in my super?
Top up your super account with a one-off after-tax contribution can be a great way to reduce your taxable income.
This can be useful for high income earners and people who skate near income cutoffs for things like child care subsidy.
But be aware that this is not a quick process and many super funds have deadlines so that you make a contribution well before June 30.
It might be too late, so check with your super fund to ensure that your contribution will be deducted from your 2020-2021 income.
“Some people get trapped – they will make the payment by June 30 but not realize it was not processed on time,” said Elinor Kasapidis, senior director of tax policy at CPA Australia.
There is also limits on how much you can contribute to your super fund every fiscal year without paying additional tax.
âIf you are making a contribution, you will also need to complete a notice of intent with your super fund and receive their acknowledgment before you file your tax return in order to claim the deduction,â Ms. Kasapidis said.
This document can be completed after June 30 when you file your income tax return.
Low-income people can also take advantage of federal government assistance payment of the super-contribution, which helps people earning less than $ 54,837 save for retirement.
âIf you qualify and make some super personal contributions, the government can match your contribution up to a maximum of $ 500, provided you have not claimed your contribution as a tax deduction,â Ms. Franks said.
I have just started investing, what should I think about?
Some people choose to sell loss-making shares before the end of the financial year minimize the taxable profits they have made on the sale of shares.
How the ATO approaches stocks depends on whether you are a stock trader or an occasional investor.
It is important to note that profits on stocks are not taxable until you actually sell them, while stocks that you have held for more than a year prior to the sale are only taxed at 50 percent. benefits.
And if you are an occasional investor and you sell your stocks, you should pay tax on total profits less total losses.
Another thing to remember is that even though the costs of buying or selling stocks are not a qualifying deduction from income, they are factored into determining the amount of any capital gain.
“If you have generated a capital gain during the year and you plan to sell some stocks at a loss, do so before the end of the year so that you can offset the capital gain,” says Franks.
She says it is important to keep good records of brokerage fees and other costs of maintaining these shares.
On top of that, you will also have to pay taxes on any dividends you receive from stocks that you haven’t sold.
Similar rules apply for cryptocurrency.
What about donations to charities?
If you want to lower your taxable income and feel good at the same time, you might consider making a tax-deductible donation to charity.
A word of warning though – the organization must be the beneficiary of a deductible donation (DGR) or a fund that registers to receive tax deductible gifts.
For example, crowdfunding sites raising funds for good causes are not always managed by RDGs, therefore donations to these campaigns and platforms are not deductible.
You can see if a charity is a RDG here.
Should I consider income protection?
You can claim this, but there is a catch.
The ATO only allows you to deduct costs from your income protection premiums for policies that are not part of your super package.
Therefore, if your income protection is part of your super package and not a separate insurer, it is not tax deductible.
What about a new car?
You may have heard of Instant Asset Write-off before. It is a tax benefit that applies to businesses, but not to individuals.
But here’s the long and the short: Unless you are a qualifying business and the car is used for business purposes, the answer is a categorical no.
So before you even start thinking about going down that route (excuse the pun), Ms. Frank has some pretty simple tips.
âA sure way to make sure you don’t make a mistake and claim something that you cannot deduct is to check with an accountant first,â Ms. Franks said.
Help! What if I read this too late?
Don’t panic, many of us are not in control of our taxes.
But if you want to maximize your deductions in the future, experts say we need to regularly check our stuff.
âIf you missed this year, learn from it and prepare better for the next year to make the most of what is available to you,â says Ms. Kasapidis.
Pretty simple stuff.
Disclaimer: This is general information. If you need personalized advice, call a professional.