Tax Tips To Try Before June 30

Because the end of the tax year is drawing near so quickly, it is critical that you verify that you are making the most of all of the deductions and credits to which you are entitled. Do not worry if you are unsure of what you can do to lessen the amount of your income that is subject to taxation; we have some suggestions for you. Continue reading to gain knowledge about four tax planning tactics that could help you save money before the deadline on June 30.

It is time to start thinking about taxes now that we are getting close to the end of June. Here are a few suggestions to try before the end of the month if you're looking for ways to reduce the amount of money you have to pay in taxes. Whether you're looking to lower your taxable income or make the most of the credits and deductions that are available to you, there are certain tactics that can help make paying taxes a little bit easier.

The end of June is drawing near, which means that it is time to start giving some thought to your upcoming tax obligations. If you are interested in lowering the amount of your income that is subject to taxation, the following are some suggestions that you should put into practise before the end of the month.

Because each suggestion provides a different means by which to save costs, you should implement as many of them as you possibly can. Who knows, maybe you'll even get a rebate for this year's taxes!

Your Tax Season Checklist: Action Items by June 30

Even though June 30 is drawing near, there is still time for you to evaluate your current financial status and determine whether or not there are any steps you can take that will result in a different tax position for you.

Before the end of the fiscal year, the most important things to consider are bringing forwards and optimising tax-deductible expenses, following new superannuation laws, and, if the chance presents itself, taking advantage of income splitting and negative gearing.

Advance and Increase Deductions

It is generally advisable to pay any tax-deductible expenses (such as donations, subscriptions, and premiums for income protection insurance) now, so that deductions can be made this year to reduce taxable income, and to put off paying non-deductible costs until after June 30 wherever possible. Examples of tax-deductible expenses include donations, subscriptions, and premiums for income protection insurance.

It is imperative that payments be made far in advance of the end of the year for retirement plan contributions, which will be covered in a later section.

For instance, a donation to a charity is not recorded on the date it was delivered, but on the date it was received; hence, any cheques or payment forms should ideally be submitted a week or two before June 30 to ensure that they count in this financial year rather than the following one.

Individuals who are not operating a business should be aware that they can pre-pay deductible expenses at the end of June for up to a year in advance for things like organisation membership fees or investment management charges. This is something that they should be aware of.

New Super Rules

PAYG earners are now able to claim a tax deduction for their personal contributions to their superannuation accounts as of the 1st of July 2017, as a result of changes to the laws governing superannuation that went into effect on that day.

This possibility was frequently missed during the 2018 tax year due to the fact that it was brand new; nonetheless, going forwards, it ought to turn into the typical procedure for PAYG earnings.

Those individuals whose income is greater than $90,000 and who, as a result, have a marginal tax rate of 39% (including the Medicare levy) will see a 24% reduction in their nett tax liability as a result of the contribution; however, they will not see a reduction in the amount of money they take home.

39% reduction in tax liability, with their retirement fund only being subject to a 15% contributions tax.

People who have money in a mortgage offset account would still be in a strong financial position even if they withdrew $10,000 from the account, put it into a retirement account, and claimed a tax deduction on it (assuming a 5% interest rate on the retirement account).

Personal contributions to superannuation are restricted to a maximum of $25,000, with this amount being reduced by the superannuation guarantee contribution, which is equal to 9.5% of your pay as of this writing.

Because the contribution is dated from the time it is received by the fund and not the time it is sent, it is essential to ensure that contributions are sent to the super fund well in advance of the June 30 deadline.

It is difficult to claim large tax deductions elsewhere, which is another argument in favour of topping up your superannuation. One reason for this is that negatively geared loans are not providing as much of a loss with lower interest rates, and it is difficult to claim large tax deductions elsewhere because there is a question mark over the viability of other strategies such as agricultural tax schemes.

Income Distribution Strategies and Negative Gearing

Other options, including as income splitting and negative gearing, should also be investigated as potential tactics.

To reduce the amount of tax that must be paid on income distributions and capital gains, married couples should discuss the possibility of putting investments in the name of the partner who brings in a smaller income.

The exception to this rule are investments with a negative rate of return, which perform better when owned by the person with the greater income.

One further alternative is to place one's financial holdings under the care of a family trust, with the adult children serving as the beneficiaries of the trust. Children who have reached the age of 18 or older are eligible for the same tax thresholds as adults, which can come in useful during the years in which they are enrolled in full-time education.

Investments made in discretionary family trusts provide the highest amount of freedom, and this method may enable the trust to disburse the income generated from its investments in a manner that results in significant tax savings.

However, investors should exercise caution when considering the use of trusts for investments that have a negative gearing, as this type of investment creates tax losses that can be sheltered by a trust.

Comparison of Deductible and Non-Deductible Debt

When it comes to your taxes, it is typically recommended that you make payments towards non-deductible debt whenever it is practicable to do so.

One strategy that is frequently used is to finance all income-generating investments with an interest-only mortgage while simultaneously paying principal payments on a mortgage and any other debts that are not tax deductible. This is a sensible method and totally acceptable to the tax office when set up properly.

Be wary, though, of any attempts at debt restructuring that seem to be motivated by tax evasion, as the ATO may try to enforce anti-avoidance legislation.

Investors should explore tax-advantaged investments whenever possible for the sake of future planning, provided that these investments are compatible with the long-term investment strategy.

No investment should be made solely due to the fact that it will have a favourable tax treatment, but at the same time, it is essential to be aware of the tax implications that will result from the structure of the investment.

For instance, buying an investment that offers a discount on capital gains or dividend income that is fully franked can be a superior choice than selecting one that may yield the same return but does not offer the same tax advantages.

Understand How to Support Claims

The Australian Taxation Office (ATO) has significantly increased the amount of attention it pays to both the nature and the total amount of tax-deductible expenses reported by taxpayers.

First, as of the first of July in 2017, new regulations stated that claiming travel expenditures for the purpose of inspecting a residential rental property are not allowed unless the individual is actively engaged in the business of real estate investing. Regrettably, a large number of people are still uninformed of this development.

In a broader sense, the Australian Taxation Office (ATO) is worried that taxpayers are claiming more work-related costs than they are legally entitled to, and this issue continues to be a primary priority.

The maximum of $300 that can be claimed for work-related costs without providing receipts is one area that continues to be misunderstood.

People still need to have spent the money and be able to detail the amounts and nature of the expenses; it just means that all the receipts aren't required to claim the deduction, which does not mean that everyone gets a "automatic" deduction of $300. This does not mean that everyone gets a "automatic" deduction of $300.

Car expenses are another significant area where people frequently make mistakes, particularly when they try to write off their commute as a legitimate business trip.

Both parts of your journey would be considered business travel if you drove from your house to a meeting and then continued on to your place of employment. However, the act of driving from one's house to one's place of employment is considered to be private travel.

If the cents-per-kilometer technique is chosen, a thorough record of all business trips taken during the year needs to be maintained.

If the logbook approach is chosen, the logbook must be up to date (it should not be more than five years old and it should reflect current circumstances) and it should reasonably reflect the actual amount of time spent driving the vehicle.

Prepaying Expenses

Individual taxpayers who do not operate a business, small business entities (entities with a business turnover of less than $10M), and medium business entities (entities with a business turnover of between $10M – $50M) are all eligible to claim a tax deduction for prepayments made for an advance period of up to 12 months after the end of the financial year. This deduction can be claimed for prepayments made for an advance period of up to 12 months after the end of the financial year. When it comes to these taxpayers, making prepayments moves up the timing of the tax deduction that would otherwise normally be claimable in the following fiscal year. This is because of the way the tax code is written.

Paying for any expenses that could potentially earn a tax deduction before to the 30th of June is one approach to potentially increase the amount of your tax refund you receive. If you anticipate that your income will be reduced in the upcoming fiscal year, this may be an extremely beneficial choice for you to consider. The premium for your income protection insurance is one example, as are donations to charitable organisations and costs associated with your place of employment.

Check out the many occupation-specific guides offered by the Australian Taxation Office (ATO) if you are uncertain as to which work-related expenses you are eligible to claim. According to the Australian Taxation Office (ATO), in order to be eligible to claim a deduction for work-related costs, you need to have spent the money, not been repaid for it, and the expense needs to have a direct connection to the production of your income. In addition, you are required to provide written documentation to support your claim if the total amount of your work-related expenses is more than $300. (usually a receipt).

If you own an investment property, you may want to think about prepaying the interest on your loan for the following year in order to qualify for a deduction this current tax year. In practise, this implies that you are locking in your interest rate for the following calendar year; hence, if you are thinking about going this route, you need to be quite certain that you are getting a good rate. You also have the option of prepaying other costs associated with the property in order to increase the amount of the deduction you can receive.

Increasing Deductions for Home Offices

There are still a significant number of taxpayers who regularly perform their jobs from home. The Australian Taxation Office (ATO) has announced a simplified deduction technique that will be implemented for the 2021 fiscal year. Under this methodology, taxpayers will be able to deduct 80 cents for every hour that they work from home. If the simplified approach is used, then you won't be able to claim any additional deductions for things like depreciation, phone and internet bills, or utility charges.

Taxpayers have the option of claiming deductions for home office expenses based on real costs spent that are directly related to their business rather than using the simplified method, which allows them to take a larger deduction.

Contributing to Superannuation in Catch-Up Mode (If You Are Eligible To)

The Federal Government recently changed the law to permit taxpayers to make additional concessional contributions above their $25,000 concessional contribution cap if they did not fully utilise their available concessional contribution cap in prior years beginning with the 2019 financial year. This change applies to taxpayers who have a superannuation balance of less than $500,000 and who did not fully utilise their available concessional contribution cap in prior years. For instance, a taxpayer who has only made concessional contributions totalling $15,000 in each of the years 2019 and 2020 has the potential to use this concessional to make a deductible superannuation contribution of $45,000 in the 2021 financial year. This is because concessional contributions can be carried forwards from year to year.

Acquiring Knowledge of the Tax Rate Applicable to Base Rate Entities

Base Rate Entities are businesses that have annual revenues of less than $50 million and get less than 80 percent of their income from sources that are considered to be passive.

The corporate tax rate of a base rate entity is 26% for the financial year 2021, although this will decrease to 25% beginning with the financial year 2022. The corporation is able to I delay the timing on which it pays tax on the income; and (ii) cut the tax rate on the income by 1% if it defers the income to the 2022 financial year. This is accomplished by using a base rate entity to defer the income.

The rate at which a corporation can frank dividends to its shareholders is also affected if the company is considered a base rate entity. For instance, a base rate entity has the ability to frank dividends issued in the financial year 2021 to a rate of 26%, but it can only frank dividends declared in the financial year 2022 to a rate of 25%. A corporation may find it more advantageous to issue dividends to its shareholders in the 2021 fiscal year rather than the 2022 fiscal year as a result of changes in the rate of franking credits that might be linked to dividends.

Prepare Your Paperwork

It is a wonderful time to begin organising any paperwork you need to prepare your tax return, which you can do right now. This may contain receipts for donations, medical costs, or work-related expenses, as well as bank statements, statements referring to investments in shares or ETFs, records from your investment property, and statements relating to investments in shares or ETFs.

In the event that you have been working from the comfort of your own home, it is essential to ensure that you possess all of the necessary items in order to claim a deduction. As a direct response to COVID, the ATO developed a shortcut approach, which can be utilised beginning with the 2020-2021 fiscal year. Because of this, you are eligible to claim a deduction equal to 80 cents for every hour that you worked from home during the course of the year. In order to qualify for the expedited process, you are need to maintain a log of the number of hours you have spent working from home. It's possible that this is a timesheet, roster, or even a diary.

If you choose the fixed-rate method, you could end up with a better result. When you work from home, you need to ensure that you have a designated work location, such as an office in your home, in order to adopt this strategy.

You are required to keep a record of the actual hours spent working at home for the entire year or a diary for a sample four-week period to illustrate your typical pattern of working at home, and the flat rate for working from home is 52 cents per hour.

You may also be able to make claims for the proportion of items like phone and internet bills that are relevant to work, computer consumables and stationery like ink, and the fall in value of equipment like phones, PCs, and laptops.

Top Up Your Super

When you make contributions to your retirement account, you could be eligible for a variety of benefits. If you earn less than $54,837 per year and contribute money to your super fund, for instance, the government may additionally make a super co-contribution on your behalf, up to a maximum of $500. This applies only if you meet both of these requirements.

The amount of the co-contribution is based on both your income and the amount that you contribute. You must have an annual income of $39,837 or less in order to qualify for the maximum co-contribution of $500, and you are required to make a contribution in the amount of $1,000. If your income falls within the range of $39,837 and $54,837, the maximum benefit you are eligible for will gradually decrease as your income increases. To be eligible for a co-contribution for the current fiscal year, the money must be deposited into your super fund no later than the 30th of June.

It is possible that you will be eligible for a tax offset if you make an after-tax contribution to your spouse's superannuation fund before the 30th of June. This is especially true if your spouse does not work or earns a modest income. You may be eligible to claim the maximum offset of $540 if you contribute $3,000 to your spouse's super fund and their income is $37,000 or less. In order to qualify for this offset, your spouse's income must be $37,000 or less. According to information provided by the ATO, the amount of the tax offset decreases when the income of your spouse is larger than $37,000 and completely disappears when the income of your spouse hits $40,000.

Last but not least, if you make any contributions to your retirement account after taxes, you could be eligible to deduct those contributions from your taxable income, which might potentially help you get a larger tax refund.

Purchase a Business Asset

If you run a small company, you might be able to purchase an asset for your company, such as a vehicle or office and telecommunications equipment, and then immediately deduct the cost of that purchase from your taxes.

Under the provisions of temporary full expensing, qualifying firms will be able to make a claim for an immediate deduction for the business component of the cost of eligible assets beginning on October 6, 2020 and continuing through June 30, 2022, as stated by a representative for the ATO.

Temporary full expensing allows firms with an aggregated turnover of less than $5 billion, corporate tax entities that pass the alternative income test, and/or businesses with an aggregated turnover of less than $50 million to immediately deduct the business portion of the cost of new qualifying depreciating assets (or upgrades to existing assets).

In contrast to the immediate write-off of assets, there is no general cap on the amount of money that firms can put towards the purchase of assets that are qualified for interim full expensing.

As a result, it does not matter how much money an eligible asset costs; an eligible firm can still claim an instant deduction for the portion of the item's cost that pertains to the business.

However, corporations are required to lower the deduction to the extent that they utilise the asset for a non-taxable purpose (such as private use), and certain assets, such as passenger automobiles, are subject to specified cost limits, such as the car limit.