There’s nothing fun about EOFY. Getting things right and avoiding the proverbial slap on the wrist from your accountant (or worse, the ATO) can be stressful. But there’s a better way to approach this time of the year.
EOFY can be a great time to review your current situation and make some tweaks, which might put extra cash in your pocket.
‘How?’ I hear you ask. Simply follow the tips below: it’s got everything you need to glide through EOFY and make the most of your money.
EOFY 2021: 10 Things to do before the 30th of June
1. Get the most out of tax deductions
“I can’t wait for tax time to go through my receipts!” – said no one ever. And we get it. Even trying to remember where you put them all is painful enough.
“Did I save the laptop receipt on my computer? Or maybe the sales guy emailed it to me? No wait, I took a photo, but where did I save it?”
Sounds familiar? That’s the reality of tax time for most people. But it’s important to remember that every receipt counts: the more you claim, the more money ends up in your pocket when you lodge your tax return.
Plus, there’s no reason to fear the receipt monster. At the end of this section, I’ll give you a bonus tip to make your next tax return a breeze.
But for now, let’s look at everything you may claim. Just remember that everyone is different, so not all the below might apply to you:
Charitable donations. What goes around comes around… at tax time. Not sure that’s how the saying goes, but donations certainly count as a deduction.
Working from home. If you spent a good part of your working week at home this year, you could claim the following office expenses:
Phone and internet
Heating, cooling and lighting the work area
Printing and stationery
Equipment: computers, printers, furniture, etc.
There’s two ways to do this:
Claim a flat rate of 80 cents per hour worked from home
Manually add up the individual costs of your expenses
Important things to remember:
You must have already spent the money and keep the invoice or receipt to prove it
The expense must be directly related to your job
If you use the first method, you need to keep a record of the hours you worked at home using timesheets or diary notes.
If you want more information on this, just head to the ATO webpage.
Home insurance. Do you work from home most of the time? You could claim part of your home insurance policy as an expense.
Income protection insurance. Yes, the cost for this premium can go in your tax return. Just note this is only valid for standalone policies – you won’t be able to claim it if it's included in your super or bundled with life insurance, unless separately identified. Your insurer will usually send you a statement showing how much to claim.
Bonus tip: how to avoid the receipt hunt at tax time
Create a folder in your inbox called Tax Return 2022/23 (that’s for next year) and save everything in there. That’s it! Believe me, this will make your tax return much easier.
2. Avoid medicare levies and get the rebate
Most of us support Australia’s public health system with 2% of our income, which goes to Medicare.
But if your income is above a certain threshold you don’t meet the minimum requirements of private health insurance, you may also incur the Medicare levy surcharge (MLS). The MLS rate is 1%, 1.25% or 1.5% based on the total of:
Your taxable income
Your total reportable fringe benefits
Any amount on which you have paid family trust distribution tax.
Have a look at the ATO website or ask your accountant to make sure you avoid it.
Health insurance companies will tell you which is the minimum coverage you need to avoid the surcharge, but watch out: they’ll try to upsell you on extras. These may be useful, but aren’t necessary to avoid the MLS.
One thing you want to keep your eyes on is the Federal Government's private health insurance rebate. This is an amount the government contributes towards the cost of your private health insurance premiums.
Your eligibility to the rebate depends on your income: with a higher income, your rebate entitlement may be reduced, or you may not be entitled to any rebate at all.
If you are eligible, you can claim the rebate in two ways:
As a reduction of your private health insurance premium – applied by your private health insurance provider
As a tax refund when you lodge your tax return
3. Check what you can claim on your vehicle
Check for deductions on your car, motorbike, rocket or whatever floats your boat (that too, if you use it to go to work, but in very limited circumstances).
Do you use your vehicle for your job, other than to and from work? For example, do you regularly go for meetings, deliver goods or carry gear required for work projects? You may claim some vehicle expenses.
If you are a sole trader or have a small business, you could also claim some more expenses:
Car loans interest
4. Look for deductions on your investment propertyAre you a rentvestor, or own an investment property? Time to squeeze some more value out of it!
There are several claims you can make on your investment property:
Management fees (e.g. your RE agent) and associated costs
Establishment fees, stamp duty, or Lender’s Mortgage Insurance (LMI) – but only in some cases (better check with your accountant on these).
Just a reminder: if you made any improvements to the property, keep the receipts for any item that depreciates in value and make sure you have a depreciation schedule.
The schedule includes the deductions for the building structure and other items (such as carpets, curtains, and home appliances) that can deliver our sought-after savings at tax time. By claiming all these expenses, you could be thousands of dollars better off.
It goes without saying (but I am saying it anyway just to make sure) that if you bought or sold a property, you must keep copies of the sales contract, settlement documents, and receipts of any other associated costs.
5. Top up your super
Depending on your situation, it could be a good idea to top up your super if you can. Why? Funds in your super are generally taxed at a lower rate, plus the money will stay in your super account and increase in value for your bingo days (or your space walks if that’s how you want to spend your retirement).
There are a few different ways to boost your super savings:
Personal super contributions. If you increase your personal contributions up to the $27,500* (FY 2021/22), you may be eligible to claim a tax deduction for your concessional contributions cap. Beware that this cap is for all concessional contributions and includes employer contributions as well. You may also be eligible to make additional personal contributions from your after-tax wage up to the non-concessional contributions cap.
Employee salary sacrifice. You can agree with your employer to give up a portion of your salary (which reduces your taxable income) and put it into your super.
Co-contributions. If you are a low or middle-income earner making personal super contributions, you may receive a government co-contribution, up to a maximum $500.
Spouse contributions. Being kinder to your wife pays dividends at home and at tax time. If you make a contribution on behalf of your low-income spouse, you may be eligible for a tax rebate (maximum $540).
These are all great ideas that have received the stamp of approval from your future self. However, since diverting funds to your super may impact your ability to reach other goals, talk to your financial adviser before going ahead.
6. Prepay expenses before the 30th of June
How about a new monitor or a comfy chair for your working-from-home days, so you can stop seeing your chiro every week? Sure, he’s nice enough, but a coffee catch-up once in a while would do.
This is the perfect time for it. For example, you can purchase home office equipment under $300 and claim the deduction this year. You can also prepay expenses, such as your website domain, Canva account, industry magazine or any other work-related subscription (and no, Netflix doesn’t count, unless you’re a movie director!)
If you have an investment property, try to pay your strata, council and water rates before June 30. A good idea would be to check with your bank to see if you can prepay 12 months of interest.
7. Offset or defer capital gains
Did you have an investment win this year? Think about rebalancing your portfolio by selling an underperforming investment. Not only will you free up cash to invest in a new opportunity, but any capital loss resulting from the sale could reduce your tax payable.
Whatever you do, just make sure your move won’t affect your long-term investment strategy.
If possible, you could also arrange to receive income from your investments (this could be the interest you receive on a term deposit), after June. Therefore, the contract date (not the settlement date) should be in the new financial year.
8. Revise your investments’ ownership
While this may be a long-term tax planning strategy, you could also reconsider the ownership of your investments. For example, a family trust can give you flexibility in distributing income, so that it is received by lower rate taxpayers. You could also hand out small amounts to children or grandchildren, tax-free.
But these changes often come with capital gains tax and stamp duty obligations, so consult your financial adviser and tax accountant.
9. Make sure your tax agent is registered
Think about your accountant as your tax coach. Since ‘the best players need the best coach’, you want to have someone knowledgeable that you can trust.
The first step to check your tax agent’s credentials is to ensure they are registered with the Tax Practitioners Board (TPB).
There are two ways to check this:
Search the TPB register
Look for the registered tax practitioner symbol on their website, stationery, brochures or business cards. This symbol includes the type of registration and their registration number.
But don’t stop there: ask around, look on social media, on reviews websites, everywhere! A good accountant can be expensive, but the savings you make on your tax return can be more than the cost, and you’ll sleep better at night.
10. Plan for tomorrow
This year, try to see EOFY differently. Aside from the shopping frenzy and the dreaded paperwork, it is the opportunity to assess your finances and plan for next year and the ones to come.
You could look at your investments’ performance and future opportunities. You may review your career trajectory and aim for a promotion or check your salary level and ask for a pay rise.
Maybe you can start thinking about smashing that debt you’ve got hanging over your head. The cash boost from your tax refund would be perfect for that.
That’s a wrap!
Let’s be honest, EOFY is no one’s favourite, so well done for getting this far: give yourself a pat on the back!
One thing is sure: by applying these tips, you’ll glide through the end of the financial year.
(Yep, that’s you gliding through, in case that wasn’t clear).
What happens if you don't lodge your tax return?
Read the article to find out.READ NOW
For 15 years, Francesco has approached communication from various angles: client-side advertising manager, agency account director, freelance photographer and content writer. Working for several global and Australian finance brands (Morningstar, CBA, American Express, uno Home Loans, OFX and InvestSmart) he has learnt to understand how people save, spend, invest and feel about their money. Today, Francesco develops online content that addresses the real needs and aspirations of Australians when it comes to personal finance.