“It’s that time of year! What do I need to think of before the 30th of June rolls around again?”
If you use a tax agent for your annual tax return, you will have provided your information to your accountant and your tax return is probably ready to submit to the Tax Office, for last year’s tax.
What is different for me this year?
Many of us worked from home during the year due to COVID-19, this can mean a small tax deduction. If you worked out of your own home from mid-March to 30 June 2020, you can claim a deduction of $0.80 for every hour out of your home office. The accountant can work it out for you, but it’s as simple as letting them know the date you began working from home and your usual weekly hours worked. Assuming you worked 15 weeks at home at 40 hours/week, this could mean a tax deduction of about $480.
What about Division 293 tax? If you are a high-income earner (>$250K/year) you may have to pay additional tax on super contributions. Check your MyGov account to make sure you don’t miss seeing the notification from the ATO. You do need to pay the tax, but you don’t need any penalty on top for late payment.
How can a high-income earner get a tax break? If your spouse is younger than 75 and their income is less than $37,000, you can make a contribution to your spouse’s super account and receive a tax offset that will reduce your tax. The maximum offset is $540 and the optimum contribution amount to receive this offset is $3,000.
“I have surplus income, and I pay tax at the top marginal tax rate. How can I reduce my tax?” Talk to your pay office about setting up a salary sacrifice arrangement. This arrangement can save you some tax, and boost your future retirement benefits – that’s a win/win solution.
There is a cap in place that limits how much you can contribute to super on a pre-tax basis and this is made up of the employer contributions and any contribution you make, such as salary sacrifice. It’s important not to exceed this cap. The cap for 2020/21 is $25,000. You can also contribute a lump sum amount if you have made some savings during the year, and then claim a tax deduction against that amount, again it’s important you don’t exceed the cap.
“I sold some shares during the year at a profit and now I’m going to have to pay tax on the capital gain, can I do anything to reduce or eliminate this tax?” Yes, if you have spare capacity under the concessional contributions cap mentioned above, you can contribute part of the proceeds to superannuation and claim a tax deduction, again providing you don’t contribute more than the cap.
“During the year I sold the family home where we had lived for 20 years, but now I can’t put it into my superannuation.” Well, yes, under certain circumstances you can put it into super if you meet all the downsizer contribution rules, one of which is that you are 65 years of age or older. You don’t have to meet the work test and any downsizer contribution sits outside normal contribution caps.
Don’t forget that you can speak to one of our friendly financial advisers for information and assistance with your tax. Call us today!
Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.