As the end of financial year approaches, it is important that you take the time to focus on tax planning and tax issues that affect you before 30 June 2020 arrives.
We have outlined some of the key tax considerations below:
Prepaid Expenses
Expenses are deductible when they are incurred. For an individual this is when the expenses are paid, therefore wherever possible pay for deductible expenses prior to 30 June. This includes insurance and interest on rental properties.
Income Protection Insurance
A deduction is available for the cost of insurance to cover loss of income.
Superannuation Contributions
From 1 July 2017, caps on concessional super contributions, have been lowered to $25,000 per year irrespective of age. Non-concessional contribution limits (after tax contributions) have been reduced to $100,000 per year.
Previously, employees generally could not claim a tax deduction for personal superannuation contributions. From 1 July 2017, all individuals up to the age of 75 can claim a tax deduction for personal super contributions (up to their contributions cap) irrespective of their employment circumstances.
Eligibility for Super Co-Contribution
You will be eligible for the government super co-contribution (max. of $500 in 2019-20) if you made personal super contributions to your superannuation account during the financial year (max. $1,000), your total income is less than $53,564 and 10% comes from employment related activities or carrying on a business and you were less than 71 years old at the end of the financial year.
Home Office
If you use a home office for ‘income producing activities’ you may be able to claim a proportion of some expenses as a tax deduction (e.g. telephone, electricity, gas). To be able to claim the deduction, you must keep entries for a representative period (minimum 4 weeks) to indicate the hours you spend in the home office.
A deduction is also available for work related telephone calls. You can substantiate deductions by:
- Identification from an itemised telephone account; or
- Diary entries for a minimum of a 4 week period, (together with telephone accounts).
Motor Vehicle
If you use your motor vehicle for work related purposes the following two methods can be used to calculate your deduction:
- Cents per kilometre
– A set rate for each business kilometre
– Claim to a maximum of 5,000 business kms
- Log book method
– Based on the business use percentage as per the log book records
– Odometer readings are required at the start and the end of the period
– Written evidence of expenses is required
Of late, the ATO has allocated their resources to audit investigations, particularly on substantiation records and logbooks. Ensure your logbook is up to date.
Personal Income Tax Rates
Current marginal tax rates are shown below:
| Taxable income up to $18,200 | 0% Rate |
| Taxable income from $18,201 to $37,000 | 19.0% Rate |
| Taxable income from $37,001 to $90,000 | 32.5% Rate |
| Taxable income from $90,001 to $180,000 | 37.0% Rate |
| Taxable income over $180,000 | 45.0% Rate |
These rates do not include the Medicare Levy (currently at 2%).
Low and Middle Income Tax Offset
From 1 July 2019, the government has announced a new low and middle income tax offset to Australian resident individuals. This is a non-refundable tax offset and is in addition to the existing low income tax offset. The low and middle income tax offset is available to the following individual taxable income threshold:
2019-2020 Low and Middle Income Tax Offset
| Taxable Income | Tax Offset |
| Up to $37,000 | $255 |
| $37,001 to $48,000 | $255 plus 7.5c for each $ over $37,000 |
| $48,001 to $90,000 | $1,080 |
| $90,001 to $126,000 | $1,080 less 3c for each $ over $90,000 |
HELP, SSL, ABSTUDY SSL, TSL and SFSS Repayment Threshold
The repayment threshold for the 2019-20 financial year is $46,620. Once an individual’s taxable income is above this threshold, a repayment of the debt is payable on the lodgement of the individual’s tax return.
Travel Expenses
A deduction can be claimed for the expenses incurred in travelling for work related business purposes. If you did not receive a travel allowance:
- and travel is less than six nights in a row:
– written evidence is required; and travel diary not required. - and travel more than six nights in a row:
– written evidence is required; and travel diary is required
Medicare Levy – low income thresholds
The Medicare levy low income threshold is $22,801 for individuals, $38,474 for families (with no children) and $36,056 for seniors and pensioners for the 2019-2020 income year.
Private Health Insurance
From 1 April 2018, the rebate levels applicable are:
| Standard | Tier 1 | Tier 2 | Tier 3 | |
| Singles | ≤ $90,000 | $90,001-105,000 | $105,001-140,000 | ≥ $140,001 |
| Families | ≤ $180,000 | $180,001-210,000 | $210,001-280,000 | ≥ $280,001 |
Rebate for premium paid 01/07/2019 – 31/03/2020 and 01/04/2020 – 30/06/2020
| < Age 65 | 25.059% | 16.706% | 8.352% | 0% |
| Age 65-69 | 29.235% | 20.883% | 12.529% | 0% |
| Age 70+ | 33.413% | 25.059% | 16.706% | 0% |
The government did not change the rebate percentages between 01/04/2020 and 30/06/2020.
| Medicare Levy Surcharge | ||||
| All ages | 0.00% | 1.00% | 1.25% | 1.50% |
Depreciation
If you purchase assets to be used for a number of years you can claim a decline in value each year. ‘Depreciator’ is a business that specialises in the preparation of depreciation schedules for rental properties and can be used to:
- Obtain a Quantity Surveyor’s report on any rental property Australia wide; or
- Obtain a report listing depreciation entitlements for that property on a yearly basis.
Therefore, if you have recently purchased a rental property, please contact us to discuss the preparation of a depreciation schedule.
Substantiation
To claim your personal tax deductions, ensure you are able to substantiate your expenses:
- Claims exceeding $300 must be supported by written evidence for the entire amount, not just the amount over $300.
- $300 limit does not include award transport payments or car, meal or travel allowance expenses.
- For expenses $10 or less, provided in total they do not exceed $200, a written note detailing the same information as on a receipt (in a diary for example) is sufficient where you cannot obtain a receipt.
If you have any questions, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2020. Please do not reproduce without the expressed written consent of the author.