While the Australian Taxation Office expects a significant increase in people claiming working-from-home expenses this year, financial experts are encouraging individuals to consider other beneficial deductions.

Mr Taxman principal Adrian Raftery said 2020’s unique challenges would impact the way many Australians approached their upcoming tax returns.

For individuals expecting a lower income next year – for factors including maternity leave, redundancy or working hour reductions – Dr Raftery suggested bringing forward deductions into this financial year to claim them in a higher tax bracket.

Time is running out so consider the following:

YOUR FINANCIAL STATUS

Before jumping in and spending money with big returns in sight, understand where your income sits in terms of tax thresholds.

“The key is to not spend purely to get a tax deduction,” Dr Raftery said.

“There are many savvy – and desperate – retailers who catch so many people at this time of the year to spend money purely to get a tax deduction.

“If you earn between $37,000 and $90,000, then you are only getting 34.5 per cent back for each dollar you spend. This drops to 21 per cent for those earning between $18,200 and $37,000, and nothing at all for those under the tax-free threshold.”

OFFICE AND SAFETY EQUIPMENT

“Any office equipment under $300 each plus all office stationery will be deductible this year,” Dr Raftery said.

“The big mistake people generally make is buying a tax-deductible asset that costs more than $300 right at the end of the financial year.

“This is because depreciation of these assets is pro-rated for the number of days that you own them during the financial year.”

Dr Raftery said it was wiser to leave big work-related purchases, such as a new computer or car, to July as depreciation has more impact when spread over a whole year rather than just a few days.

The ATO said many people might be claiming expenses for protective items required for work because of COVID-19.

It said deductions for workers in some industries – including healthcare, retail and hospitality – might be available for items such as gloves, face masks and sanitiser if people paid for the items and were not reimbursed.

PRE-PAY INTEREST AND INSURANCE

You can pay 12 months in advance on things such as income protection insurance and interest on an investment.

This will reduce your taxable income, and Dr Raftery said the size of the benefit was “based on your marginal tax rate”.

SUPERANNUATION CONTRIBUTIONS

Certified financial planner Shayne Sommer said a tax-efficient strategy for people earning $37,000 or more was to make top-up concessional contributions to their superannuation fund.

“These contributions are taxed in your superannuation fund at 15 per cent, rather than at your personal marginal tax rate – so you receive a deduction on the amount contributed in your personal return,” Ms Sommer said.

“These contributions do have a cap of $25,000 per annum, so make sure you check what’s already been contributed by your employer or by you via salary sacrifice prior to making any top up contributions.”

ENROL IN SELF EDUCATION

A tax deduction is only available on self-education costs if the study is in relation to your current employment – either maintaining or improving a specific skill, or if it leads to more income.

“You can’t claim for self-education if you are out of work or you are studying to look towards a change in career,” Dr Raftery said.

“You could prepay before June 30 for a course but don’t start it until next tax year and still claim the deduction in your 2019-20 tax return.”

CHARITABLE DONATIONS

If you are looking to donate to a charity and wish to claim it as a deduction, first ensure the charity has a Deductible Gift Receipt status and make sure to keep a receipt.

“If you donate $100, you are only going to get a percentage back based on your marginal tax rate,” Dr Raftery said.

IF COVID-19 IMPACTED YOUR INCOME

“If you are currently in a tough financial position, prior to June 30, 2020, ensure you have explored all forms of government assistance available for those significantly impacted by the COVID-19 crisis, whether it is the Government’s ‘early access to super’ relief package, JobKeeper and JobSeeker for people who have been stood down from their jobs, or other social security benefits,” Ms Sommer said.

“If COVID-19 highlighted that you weren’t prepared financially should the unexpected arise, it’s a good idea to work towards creating a savings plan for any future economic issues,” she said.

“A loss of income can happen at any time – it doesn’t need to be as a result of a pandemic. Commit to saving a small amount each month and remind yourself every dollar saved is a safety net for the ‘future you’ should you need it.”

FINANCIAL ADVISER

Ms Sommer said a certified financial planner could help people understand money matters and accumulate and protect their wealth.

“Generally, the initial fee associated with receiving a financial plan is not tax-deductible (but) ongoing costs associated with financial advice and wealth creation are often deductible,” she said.

To access the ATO’s Tax Time Essentials resource hub, visit www.ato.gov.au/taxessentials 

Original article published here on 23 June 2020 by The Daily Telegraph.