It always takes some planning to get your finances in order for the end of financial year, and this year may look a little different, come June 30.
The COVID-19 pandemic may have impacted your circumstances and therefore your situation could be looking different to normal. Perhaps you have been working from home, your wages may have reduced or been boosted by government payment support, or you have had to make major financial decisions as a result.
Here are things to consider to ensure you’re on the front foot come June 30.
Working from home deductions
Whether you’re used to working from a home office or have been forced to due to COVID-19, it’s good to be across what you can claim on tax.
Given that working from home is a new situation for many, the Australian Taxation Office has made it easier to claim deductions. You may not need to submit a detailed logbook, as you can now claim a deduction of 80 cents for each hour you work from home due to COVID-19. Therefore you only need to keep track of the hours you work from home, along with proof of your expenses.
There are a couple of provisos with this ‘shortcut method’: the work needs to be fulfilling your employment duties (not simply checking your email every now and then) and you must have incurred additional deductible running expenses as a result of working from home.
These home deductions must be directly related to earning your income – as tempting as it is to claim Netflix as a research tool, unless you’re a television critic this is unlikely to fly!
You need to keep records of your expenses and be able to show that you, not your employer, has paid for them. You must also include any allowance you receive from your employer as income on your tax return. Be mindful that the ‘shortcut’ method may not be the best for your circumstances and it may be worthwhile, if a little more laborious, sticking to the old method.
For more information on working from home deductions, visit the ATO’s website.
Boosting your super
While the COVID-19 situation has seen some dipping into their superannuation, if you’re able to, it may be a smart idea to use the end of financial year to give your super a bit of a boost as even the smallest amount can really add up over time.
There are many ways of growing your super to think about, including;
- Making tax deductible contributions,
- Salary sacrificing up to your $25,000 annual cap
- The low income super tax offset is available to those who earn $37,000 or less a year, and means that if you or your employer contribute to your super, you may be eligible for a tax offset of up to $500 per year,
- The spouse contributions tax offset means you may be able to claim an 18% offset (maximum of $540 offset) on contributions up to $3000, that you make on behalf of your non-working or low-income-earning partner.
Bring forward expenses
If you are in a position to do so, perhaps consider bringing forward any expenses or delay income. This may not be possible for many businesses and individuals in the current climate, but it’s worth keeping in mind if this is an option for you.
Working from home may have made you realise you need to upgrade your home computer or invest in better office furniture. Making your purchases before the end of the tax year will not only impact your return sooner rather than later, but you can take advantage of EOFY sales.
Clear the decks
With some tough times ahead on the economic front, it’s a good time to evaluate your income and expenditure. Now is the perfect time to look at your insurances, utilities and seek out any no longer relevant expenses to see what you can cut back on.
Your home loan/s
We’re currently in a period of historically low home loan interest rates. If you haven’t done so recently, prior to end of the financial year is a great time to review your finances. There’s still time to consider a home loan refinance which may offer:
- A lower interest rate with lower repayments
- A review of your investment loan structure to be more tax effective
- An opportunity to consolidate high interest personal debts like credit cards
It’s a bit of a different environment for end of financial year this year. When it comes to a review of your lending needs or an overall budget review, a local LJ Hooker Home Loans lending specialist can help.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.