As the end of financial year approaches, we’ve put together some tips to help you maximise your tax effectiveness.

1. Make sure you have lodged your 2020 tax return

There are a number of reasons to get your tax affairs in order before June 30:

• If you receive family payments from Centrelink and have not lodged your 2020 tax return by 30 June, 2021 you will be required to repay all of your Centrelink payments.
• If you are eligible to receive family tax payments from Centrelink and have not yet claimed, you will be ineligible to claim if your return is not lodged by 30 June 2021.
• If you want to claim a tax deduction for personal superannuation contributions in your 2020 tax return you need to have notified your superannuation fund by 30 June, 2021.
• Risk of ATO issued default assessments and penalties.

2. Consider your work-related expenses

For employees there are a number of deductions you can potentially claim.
To claim a deduction for work-related expenses:

• you must have spent the money and you weren’t reimbursed
• the expense must directly relate to earning your income
• you must have a record to prove it (usually a receipt). 

Phone – You need a phone log to claim more than $50 for phone calls on a phone you own. This diary can be created from a detailed monthly phone bill. Just go through and mark the work-related calls and work out what percentage of your total calls they make. If you don’t get a detailed statement then you need to take a screen shot of your recent calls for the last month. Print it and work out the work-related calls.

Home Office – The most important thing you need to do before 30th June, 2021 is keep a log of your hours worked from home for a month. The choice from 1 March, 2020 is 52 cents an hour and claim other expenses such as stationery, internet and computers on the basis of actually incurred, or 80 cents per hour to cover everything. Keep receipts for stationery and the like, and your accountant can help you work out the best option when completing your tax return.

Car – Take your odometer reading at 30 June 2021 as for some claims this is required. If you are using a logbook to claim your motor vehicle expenses make sure you start it before 30 June 2021. A logbook has to be kept for 3 months every 5 years. If your work-related percentage has not changed you can use your previous logbook as long as it is less than 5 years old. Without a log book you can only claim up to 5,000kms per car at 68 cents a kilometre. In that case you are required to have a detailed reasonable estimate of the deductible kilometres travelled.

Self-education – You can claim a deduction for work related course fees paid in the FY21 year. All study you claim as self-education must be connected to the income you are currently earning (either to maintain or improve your specific skills or knowledge) or is likely to result in increased income from existing income earning activities. Doing a course while working full time does not make the course deductible so make sure you get a letter from your employer saying that the course is relevant.

3. Capital gains considerations

Are you considering selling a rental property or shares before 30 June, 2021? The date the contract is signed determines the year that the capital gain is taxed, not the date it is settled.

If you are making a capital loss that can be carried forward to offset against future capital gains. If you already have a capital gain in your 2021 income then you need to make sure this loss is in the 2021 financial year if you want to offset the gain you have already made.

4. Important tips for property investors

• Travel – you can no longer claim a tax deduction for travel when inspecting rental properties.
• Repairs – consider whether you can bring forward any repairs that may be needed and have them completed before June 30 2021.
• Remember that expenses for property repairs are deductible provided that they relate to wear and tear or other damage as a result of earning rental income.
• The cost of initial repairs at the time of purchase are not deductible.
• Prepaying interest on property investment loans – Consider pre-paying interest on property investment loans. This can also protect against possible interest rate rises over the next 12-month period.
• Short-term holdings – Renovating a property with the intention of selling it for profit in the short term may incur tax as a “profit-making scheme”. CGT concessions will not be able to be taken advantage of as a result and GST may be a consideration.
• Personal expenses – Ensure that any claims or interest on borrowings for investments can be clearly separated from interest on borrowings of a personal nature.
• Depreciation deductions – A qualified quantity surveyor can provide a depreciation schedule outlining the available tax deductions and providing a significant return. The cost of having a depreciation schedule prepared is also tax-deductible.

5. Cryptocurrency – Gains or Losses

Cryptocurrency gains and losses need to be declared just like any other investment.

The ATO has announced that it is paying particular attention to this emerging market as they now have access to crypto transaction data obtained from digital currency exchanges

Tax treatment of crypto transactions is dependent on an individual’s circumstances. Some people will have capital gains and losses from their crypto transaction, but others will have income tax gains or losses.

6. Superannuation strategies

Super contributions are one of the areas that individuals need to review each year according to their circumstances.

Tax deductible (Concessional) contributions

Concessional contributions are before-tax contributions made into a super fund. They include employer contributions; salary sacrifice payments and personal contributions that can be claimed as a tax deduction. In the 2020-21 financial year, the concessional contributions cap is $25,000 for all ages but will be increasing to $27,500 in the new year.

Suppose your total superannuation balance was less than $500,000 on 30th June 2020. In that case, you may be entitled to carry forward your unused contributions, contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts. This is particularly useful for people who have made capital gains or are approaching retirement. Your accountant and financial adviser can help you determine just how much money you can contribute to super this year and still be entitled to a tax deduction.

Concessional contributions are taxed at 15%. Individuals may also pay Division 293 tax, which is an additional tax on concessional contributions for individuals whose combined income and contributions are greater than $250,000.

Non-concessional contributions

Non-concessional contributions are paid into super funds from after-tax income. They include contributions made by individuals or their spouse to a super fund where contributions are not claimed as an income tax deduction. The annual non-concessional contribution cap for the 2020-21 financial year is $100,000 and is increasing to $110,000 in the new year.

Eligible individuals may make bring-forward contributions, allowing them to bring the next two years of their annual non-concessional contributions cap forward into the current financial year without breaching the contributions cap.
Non-concessional contributions are not taxed unless the caps are exceeded.

Tax can be very complex to navigate and tax strategies should support your overall financial goals. Make sure you speak with your accountant or financial adviser to ensure your tax approach is the most appropriate one for your needs.