With the end of the financial year drawing to a close, it is the ideal time to get your finances in order before the tax man comes knocking. Sorting out your financial affairs now could save you money, especially when it comes time to pay your tax.
The new payment summary system
The first thing you should know is that you may not receive a payment summary from your employer this year.
Previously, at the end of a financial year, an employer would provide its employees with a payment summary (sometimes called a group certificate) containing the details of the individual’s yearly earnings, tax and super. This will change for most people.
The new Single Touch Payroll system requires businesses of more than 20 employees to register the information directly with the ATO and the information will then be made available to individuals through myGov and ATO online services.
This shouldn’t change the way you do your tax as it is essentially the same information, only now instead of getting the summary from your employer you will get it through myGov and it will be called an ‘Income Statement’.
It is important to note that you won’t be able to view your income statement without a myGov account, which you can set up if you have an email address.
You may still receive a payment summary if you work for a small business, as the Single Touch Payroll system is not compulsory for businesses with less than 20 employees until next financial year.
Pay your expenses before June 30
If you have tax deductible expenses that are due and can be claimed this financial year, then pay these now. This means if you need new work technology or equipment if you want to donate to charity, if your investment property needs repairs or maintenance – do these and pay the bills before June 30. This means you can claim them sooner, rather than 12 months later.
This strategy is ideal if you are expecting a hefty tax bill, as you will possibly reduce what you will have to pay in tax. You may also find that making a payment now will reduce any capital gains made on property and other assets, especially if the bill is related to the asset.
One of the most common property payments you can make is the pre-payment of investment loans or loan margins. However, you may need to make specific arrangements before jumping in. For instance, if you pre-pay interest you will need to agree with your financial institution on the amount that needs to be paid. You also need to work out if it’s more beneficial for you to make the payment earlier or wait until it is due.
Declare your investment property deductions
If you own a rental property you need to declare your income earned from this property. That includes any bond money that you are eligible to keep (i.e. if your tenant defaults or you’re entitled to keep it for repairs or other reasons), any fees or costs of repairs received from tenants (you can then claim the cost of the repairs), and any insurance payouts you’ve received.
Furthermore, if you’re profiting off short term or holiday leases, such as via Airbnb, you must declare this income too.
Learn more about property investment deductions here.
Know your work-related expenses
If you belong to a professional body or subscribe to a magazine that is work related, then these are classified as work expenses. The same applies to tools purchased to use at work or courses that benefit your job. You can also claim laundry on parts of your work uniform, some transport costs to and from work, plus home-office related expenses.
This, however, is where it gets tricky. If you work from home it’s important you only claim things like rent, internet and phone costs as much as you have used these for business purposes. This means keeping records is important.
Make sure you read up on everything you can claim, especially if you’re doing your own tax declaration. You can find information on deductions here.
The only super payments you can claim tax on are personal concessional contributions. You cannot claim contributions made by your employer. However, if you elect to make further personal contributions (i.e. from your own bank account, from your after-tax income), you may be eligible for tax deductions. Furthermore, if you are self-employed you too may be able to claim deductions on super contributions.
Currently, concessional super contributions (“concessional” includes employer and personal contributions) are capped at $25,000 per year, and you can claim roughly 15% of tax back on the amount of these contributions that were made personally.
There are some rules and restrictions, including age limits, spouse contributions and income variations, as well as forms you might need to fill out to get the wheels in motion. You can read about those here.
If you are a self-managed super fund member, and you are self-employed, then you can bring a ‘contributions reserving strategy’ into play. If you contribute to your Self-Managed Super Fund (SMSF) in June of one financial year, you can essentially assign the amount to July (aka the start of the next financial year). Transferring this balance to July is useful if you want to avoid going over the yearly concessional contributions cap, but it also allows you to claim the tax on that sum in the same financial year. Please note that this does not happen automatically and you must fill out a ‘request to adjust concessional contributions’ form. This method is beneficial for individuals who have made a significant capital gain.
Words by Rebecca Mitchell