It’s that time of year again, Tax Time! For individuals who have a tax agent, like Canny Group and their accounting team on hand, we will lodge your tax return for you on your behalf and you have until 15 May 2021 to do this. However, if you are lodge your own tax return you have until 31 October 2020 to have it lodged.
Either way, we have put together some tax tips that you should consider before 30 June 2020 to help; reduce your taxable income, maximise deductions, take advantage of tax offsets, accessing free money from the Government as well as COVID-19 incentives and advice for retirees. Everyone has been impacted by COVID-19 in many different ways, and we have put together these tips to help you be as prepared as possible and hopefully empower you to maximise your refund when it comes to lodging your tax return.
TAX TIP #1… Ways to reduce your taxable income!
SUPER CONTRIBUTION // make a personal deduction superannuation contribution. Check with payroll to determine how much has been contributed so far. The concessional contribution cap is $25,000 for the 2019/20 income year.
UNUSED CONTRIBUTION // do you have any carry forward unused concessional contribution from the 2018/19 income year? If your total superannuation balance is under $500,000 at 30 June 2019, you may benefit from making a catch-up deductible super contribution. This may be especially beneficial to those who have additional income due to sale of investments such as shares or property.
DEFER INCOME // are you nearing retirement? It may be worthwhile to defer your income until after 30 June if your income will be smaller in the subsequent year.
TAX TIP #2… Maximise deductions!
MOTOR VEHICLE EXPENSES // individuals who use their car for work related travel can claim 68 cents per kilometre up to 5,000km for business travel or claim under the log book method of car expenses. Canny Group’s team of accountants will be able to determine which method yields the greatest deduction.
WORK-RELATED EXPENSES // consider if you need any work-related items such as tools of trade, computer, subscriptions or work clothing and whether you could purchase or pay for those expenses before 30 June to increase your deductions.
DONATIONS // or gifts of $2 or more to a deductible gift recipient are tax deductible. Where spouses are on different marginal rates, consider making donations by the spouse that is in the higher tax bracket to maximise the benefit of the deduction.
HOME OFFICE // if you have been working at home due to COVID-19, you may be eligible to claim a rate of 80 cents per hour for all your running expenses from 1 March to 30 June. Multiple people living in the house could each individually claim the 80 cents per hour rate.
PROTECTIVE CLOTHING // did you buy protective items such as gloves, face masks, sanitiser to use at work due to COVID-19? If your specific employment duties require you to have physical contact or be in close proximity to customers or clients while carrying out your duties or you are involved in cleaning premises, you can claim a deduction for protective items. The ATO considers those that work in the following industries or occupations are exposed to the risk of illness in the course of working:
- Medical Industry
- Cleaning Industry
- Airline Industry
- Hairdressing + Beautician Industry
- Retail, Cafe + Restaurant Industry
TAX TIP #3… Take advantage of tax offsets!
SPOUSE OFFSET // receive a $540 tax offset by making a personal contribution up to $3,000 to super on behalf of your spouse. Only available if your spouse’s taxable income is less than $37,000. A lower tax offset may be available if you contribute less than $3,000 or your spouse earns between $37,000 and $40,000.
LOW + MIDDLE INCOME OFFSET // individuals on a taxable income of $37,000 or less will receive up to $255 tax offset and those on taxable incomes between $48,000 and $90,000 will receive the maximum $1,080 offset. Incomes between $90,000 and $126,000 will receive partial offset. This is not a tax refund but a tax offset.
TAX TIP #4… Access free money from the Government!
CO-CONTRIBUTIONS // receive a Government co-contribution of up to $500 paid into your superannuation by making an after-tax superannuation contribution of $1,000 or more. Full amount is available to those with taxable income less that $38,564 and a reduced amount is available to those with taxable income less that $53,564.
TAX TIP #5… COVID-19 impact!
JOBKEEPER + JOBSEEKER // JobKeeper and JobSeeker payments are assessable income and need to be included in your tax return.
STIMULUS PAYMENT // the $750 stimulus payment that was provided to social security, veteran and other income support recipients and eligible concession card holders is tax free and does not need to be included in your tax return.
CORONAVIRUS SUPPLEMENT // the $550 Coronoavirus fortnightly supplement is taxable income and will need to be included in your tax return as income.
EARLY RELEASE OF SUPER // individuals who have applied for and received the early release of superannuation will not nee to pay tax on the amounts release from super.
TAX TIP #6… Retirees!
REDUCE PENSION // the minimum drawdown requirements for account based pensions has been halved for the 2019/20 and 2020/21 income year. This will benefit retirees with account based pension by reducing the need to sell investment assets to fund minimum drawdown requirements.
SOCIAL SECURITY // in light of the low interest rates on savings, the Government has reduced social security deeming rates from 1 May 2020. You could be eligible for Centrelink entitlements such as the age pension or Commonwealth Seniors health care card with the lowering of deeming rates.
Helen Yau – Manager + Financial Planner
CA, BCom, Dip FP, SSA