The end of the financial year is almost here… and that means it’s tax time! With 2020 being an extraordinary year, the ATO is already expecting that this tax season will be like nothing ever seen before.
With so many of us experiencing new working conditions during the COVID-19 pandemic, we thought it was the ideal opportunity to offer you some helpful tips for maximising your tax return.
Working from home deductions
As part of their support for individuals and employees, the ATO introduced a temporary new guide on ‘working from home’ expense claims. These are designed to help people who have changed their working arrangements and have not previously made these types of deductions.
From 1 March to 30 June you can utilise a ‘shortcut’ simplified method of calculation that reduces the amount of record keeping required. The deduction is calculated at 80 cents for every hour you have worked from home during the specified date range. You can claim the 80 cents per hour regardless of the actual expenses you have incurred, but you must have incurred additional running expenses in some of these categories when working from home, to be eligible:
- electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- cleaning costs for a dedicated work area
- phone and internet expenses
- computer consumables (for example, printer paper and ink) and stationery
- home office equipment, including computers, printers, phones, furniture and furnishings
There is also the standard home office expense calculation method that you can employ which is based on your actual expenses incurred. This method can be more complicated if you are not familiar with using it and records are required. Again, there is more information on the ATO website to help you determine which method will best suit your circumstances.
Collate all your receipts
Aside from your working from home deductions, it’s also important to make sure you have all your other tax-deductible payments clearly organised. This is where good record keeping is a must.
If you use your vehicle for work, it’s imperative that you keep a travel log that includes the date, time and distance travelled. If you have to wear a compulsory branded uniform, the cost of laundry can be deducted. You can also claim a deduction for education and study expenses if they directly relate to your current employment.
Outside your employment environment, don’t forget that any charitable donation over $2 is also deductible… so if you donated to any worthy cause over the year, make sure you have your receipts on file.
Spouse tax offset
If you have the capacity to make a direct contribution to your spouse’s superannuation, it could provide you with a tax offset of up to $540. Your contribution must be made directly into their superannuation fund – not deposited into your fund and rolled over to theirs. And your partner’s income needs to be below $37,000 for the 2019/20 year. For every dollar over $37,000 earned, the offset amount reduces, until it phases out at $40,000.
Personal superannuation contributions
If you earn more than $37,000, it could be a tax-effective strategy to make your own personal superannuation contribution. The current cap on annual concessional contributions is $25,000 – this includes your 9.5% employer guarantee and any salary sacrifice you have undertaken.
Additional personal contributions to your super could be tax-deductible. Plus, the tax rate within your super fund is only 15%, which is likely to be less than your marginal rate. To find out more about this strategy, we recommend discussing your personal situation with a professional financial adviser.
Government co-contribution to superannuation
Our final tip isn’t specifically tax related… but could be an extra boost for part-time or casual workers who have had a difficult time during recent months… or for any low income earners.
The Federal Government offers a superannuation co-contribution to help increase your retirement savings. If you make personal after-tax contributions to your superannuation and you are found eligible, the government also contributes up to $500.
The income threshold for this co-contribution starts at $38,564. If your earnings are on or below the threshold and you have made a contribution of $1,000, you will receive the maximum co-contribution amount of $500.
The upper threshold is $53,564 and if your income is between the two amounts, your entitlement will reduce accordingly, down to the minimum of $20. You can find out more about this benefit on the ATO website.
Here at First Financial, we have a team of dedicated financial advisers who can help you navigate all tax related opportunities. If you’d like to find out how we can help you, please contact us today. Read more Financial Planning articles.