Unless you’re an accountant this end of 2019/2020 financial year’s tax estimate is set to be a touch complex. Working from home for an extended period of time means that many of us are eligible to claim more tax offsets than in the past. Since our homes have been our office for a quarter of a year or so, we didn’t want to miss any claimable home office expenses. We decided to speak with the experts.
Senior Financial Planner and Co-Founder of Lime Financial Planning, Nathan Fradley generously offered to help us navigate the perplexing quagmire that is our 2020 EOFY tax return. Your accountant will definitely thank you for thinking of these things in advance!
Remote work is a new frontier for many. You may not know that working from home means that a portion of your home expenses may be claimable as a tax deduction.
These include things like internet and electricity expenses, consumables and stationery. Anything that comes under your home-office really.
Normally, you would need to work out all of your work-related home expenses, based on how many hours a week you work at home, and keep fastidious records. Luckily, due to the nature of the pandemic, the Australian Tax Office (ATO) has created a ‘shortcut’ method of 80c per hour, to save time and calculations –but only from March 1 2020.
It’s best to get advice from your accountant as the shortcut method may result in a lower deduction than you’re actually eligible for. It’s still great news for those of us who may be a touch lax on keeping records.
Generally speaking, you can claim a tax deduction on things you bought or paid for, which were required for you to earn income. Here’s an article that goes into a bit more detail. These tax-deductible expenses can help reduce the taxable income you’re assessed on, which means you pay less tax!. IF you anticipate a drop in income next financial year, it may also be beneficial to claim on these things this financial year.
Some tax-deductible expenses you can prepay include:
These kind of expenses are always tax-deductible throughout the year, but if you pay them right before the end of the financial year, you get your money back sooner! Here’s a link to the ATO’s general information on prepaid tax-deductible expenses.
Good news! Personal Deductible Superannuation contributions are also tax-deductible.
So many people just set and forget their super. But did you know that you can addup to $25,000 a year in total into your Superannuation fund? This includes what your employer has already put in.
2019/20 is also the first year you can utilise the 2019 cap as well!
In layman’s terms: Let’s say your employer put in $15,000 this year and $15,000 last year – you have $10,000 plus $10,000 you could add into your Super.
So how does this benefit you? It helps to reduce your taxable income. It also builds up your superannuation quite dramatically for your future financial security and since investment markets are ‘down’ right now, this can springboard your future super balance!
It needs to be stated that we are in uncharted waters with the current market circumstances.
If you’re looking to build long term wealth, now is a great time to learn about investments and take advantage of opportunities as they arise.
We always recommend avoiding “get rich quick” investments such as hot stock tips, currency trading or anything that sounds too good to be true. Focus on building long term wealth.
The end of the financial year is a magical time where everyone rushes to make the most of their financial situation. Once you have finished getting everything together, be sure to plan out next year - or better yet, the next 5 years. Being proactive about your future will yield better results than last-minute reactivity.
There may be other items as well depending on your circumstances. It’s always ok to ask your accountant or a financial planner.
Nathan Fradley is theHead of Advice, Senior Financial Planner and Co-Founder of Lime Financial Planning.
We’re super grateful that Nathan took the time to help us navigate the 2020 EOFY with some real-talk. If you have any questions related to planning for your retirement, super or investments you can book a chat with Nathan for free.