Jun 05

Making the most of the end of the financial year

Posted by Peter Marmara-Stewart at Wednesday, June 05, 2019

As the end of the financial year draws closer, thoughts turn to tax. So how can you streamline your tax return while ensuring you take advantage of all the claims that are possible?

In the first instance, you need to collect all your records of both your income and your expenditure throughout the year. This includes:

•  All your income whether it’s from your employer, your super or your pension
•  All your bank statements including interest earned and charges paid
•  Dividends and distributions from your investments
•  Records of investment sales and purchases for capital gains/loss purposes
•  Income from rental properties and associated expenses
•  Foreign income
•  Your private health insurance policy details

Nowadays, there may also be income to report from your participation in the shared economy, such as money earned from Uber or AirBnB.

Ideally, all this documentation should be to hand. If it’s not, then seriously consider using an app in the 2019-20 year to record all these transactions on a regular basis so when June 2020 comes around, you won’t spend hours hunting out all the documentation. The Australian Taxation Office, for instance, has a mydeductions app specifically for individuals and sole traders.

Another way to help monitor your expenses is to establish a separate credit card or bank account for your work-related expenses so that they are easily identifiable.

What can you claim?

Once you have your documents to hand then you need to consider what you are allowed to claim as work-related expenses.

Basically there are three key criteria:

•  You must have spent the money yourself without having it reimbursed
•  The money must be directly related to earning income
•  You must have a record to prove it.

If your expenses meet these criteria, then there are a host of expenses you may be able to claim. These include vehicle and travel expenses; clothing, laundry and dry cleaning; gifts and donations; home office expenses; self-education; bank interest and account fees; and tools and equipment.

As an investment property owner, you can claim items such as land tax, rates, body corporate charges, insurance, repairs and maintenance, agent’s commission, gardening, pest control, cost associated with drawing up leases and advertising for new tenants.

If you have income protection insurance outside super, then tax time is a perfect opportunity to review your cover, and maybe pay your premiums up to 13 months in advance. That way, you can claim those premiums as a deduction in the current year and reduce your tax liability. Other types of life insurance are generally not tax deductible, inside or outside super.

Check your Super

Superannuation is another area for attention. If you have not reached your concessional contributions cap of $25,000 (which includes your employer’s contributions and salary sacrifice amounts), then consider putting the shortfall into your super. Any personal concessional contributions you make can be claimed as a tax deduction. But don’t wait until the 11th hour, as your contribution may not be processed by the fund until after June 30.

Taking advantage of the government’s co-contribution is also a worthwhile consideration for lower income earners. If you earn less than $37,697 and contribute $1000 to your super as a non-concessional payment, the government will match it with a $500 co-contribution. That’s basically a 50 percent return on your investment. The co-contribution reduces progressively to nil once your income reaches $52,697.

Changes for inactive Super accounts

It is also worth noting that come July 1, your super fund will cancel your life insurance policy if no contributions have been made to your account in the last 16 months. If you want to maintain insurance cover within super, you need to contact your fund or make a contribution to keep your account active. Alternatively, you could seek cover outside super.

Tax time does not need to be taxing. Careful documenting throughout the year can ensure you have a dream run to making the most of your tax return.