End of Financial Year 2019/20: Super and tax tips for individuals
The end of the financial year is fast approaching. Now is a great time to prepare and seek additional advice on the management of your superannuation and tax.
Top-up your super and save tax
The cap for concessional super contributions is $25,000 per financial year. If you are employed, self-employed or earn taxable income from other sources (such as rental or investment income) and under 65, by making a super contribution from your after-tax income or savings before 30th June, you may be able to claim it as a tax deduction and reduce your taxable income while boosting your super. Depending on your circumstances, this strategy could result in a tax saving of up to 32% – and help you retire with more.
There are also still significant tax advantages if you choose to make non-concessional contributions up to $100,000. You can also use the ‘bring-forward rule’ to contribute up to $300,000.
Split your contributions with your spouse
If you make an after-tax contribution into your spouse’s super account and they earn less than $40,000 pa, you may be eligible for a tax offset of up to $540.
This strategy could be a great way to grow your super as a couple. Not only could you boost your spouse’s super, the tax offset could help reduce your income tax.
Top-up your super with help from the Government
If your income is under a certain threshold, then making personal after-tax super contributions could enable you to qualify for a Government co-contribution of up to $500.
This additional super contribution, which is known as a co-contribution, could make a significant difference to the value of your retirement savings over time.
Manage your $1.6 pension cap
For those who have retired and are now accessing your super, you must maintain a balance of less than $1.6 million to avoid possible penalties. There are options for how to deal with is:
- Change your super back to accumulation phase. In this case, earnings are taxed at 15%.
- You can withdraw excess funds and invest them elsewhere, proving you satisfy the condition of release. In this case, earnings are taxed at your marginal tax rate.
Whichever option is chosen, it is essential to do so by 30 June.
The $1.6 million cap also applies when there has been a transfer of funds, following the death of a spouse. Therefore, forming an estate plan that deals with this is wise.
As we all know, when completing your tax return, there are certain items for which you can claim deductions. Most of these are expenses incurred directly concerning earning your income.
We’ve prepared this summary to help you get ready.
To claim a work-related deduction:
- You must have spent the money yourself and were not reimbursed
- It must directly relate to earning your income
- You must have a record to prove it.
If the expense was related to both work and private purposes, you could claim the portion that relates only to work. Again, you cannot claim for any expense that has been reimbursed.
Some examples of work-related expenses include:
- Vehicle and travel expenses for work, excluding travel to and from your regular place of work. If you wish to claim under the logbook method, make sure your logbook has been prepared within the last five years. If not create a new one for a 12-week period.
- Clothing and cleaning expenses for occupation-specific clothing.
- Self-education expenses
- Tools, equipment and other assets that are required to be supplied by you to perform your job. For example, a proportion of a mobile phone expense or a carpenter’s tools of trade.
Other common deductions
- The cost of managing your tax affairs, such as accountants’ fees
- Gifts and donations to registered charities
- Income protection insurance – if you have a large amount of debt you need to have this so get it in place before 30 June and get the benefit of the tax deduction as well.
- Personal super contributions when the amount is paid outside of SGC or salary sacrifice.
- Deductions relating to investments such as interest costs and financial planning fees.
Deductions relating to working at home during the COVID-19 period
Those people who have been required to work from home during the COVID-19 period can claim expenses. The basic principle is the same as when working from home at any time.
These can include office expenses along with a portion of heating, cooling and lighting and depreciation on items used for work at home. As always, the expense must to directly related to your work and proof is required.
The ATO has created a short-cut method to simplify the calculation of expenses. This amounts to 80c per hour for all additional work-related expenses.
The ATO is watching
The ATO rules around tax deductions are precise and strictly policed. The ATO has both algorithms to highlight potentially fraudulent activity along with random and targeted audits.
Staying on top of tax law is a primary requirement of a registered accountant and tax agent.
We’re here to help
If you would like help or advice with optimising your super or compiling your 2019//20 tax return or want to be best prepared, contact us today.
If you'd like to find out more about WLM's financial planning services, click here.