Below we have outlined some common strategies, if you would like to discuss these, or anything else in more detail, please contact our office.
Individual taxpayers can claim an income tax deduction for personal super contributions made to their superannuation fund prior to 30 June. There is an annual cap of $25,000 on the amount of personal & employer contributions that can be made for any year however for the first time, individuals are able to 'carry forward' any unused contributions from 2018-19 and add them to their 2019-20 cap if their total super balance is below $500,000. This represents a significant opportunity to reduce an individuals tax liability, whilst still keeping the money in your hands (albeit, within superannuation).
There are penalties for breaching these caps so we recommend speaking to one of our consultants before making any such payment.
Home Office/Working from Home
With more people working from home during the Covid-19 lockdown period, the ATO is expecting to see an increase in the size and regularity of home office deductions. If you've spent more time working from home this financial year it is important to be aware what you may be able to claim.
Fixed Rate Method
You can claim a deduction of 52 cents (80 cents for the period between 1 March and 30 June due to Covid-19) per hour you work from home. This fixed rate covers all expenses you incur for additional running expenses as a result of working from home such as utilities, repairs, etc. To claim using this method, you must keep records of either your actual hours spent working from home during the year, or a diary for a representative 4 week period to be applied across the whole year.
Actual Cost Method
Using this method, you can claim the additional running costs you incur directly as a result of working from home. The record keeping requirement for this method is more stringent as it requires receipts/invoices to be kept for all running costs. These costs must then be apportioned on a reasonable basis. Where a separate home office is kept exclusively for business or work related use, a reasonable method of apportionment could be the total floor area of the office in relation to that of the whole home. However, this calculation becomes more complicated where there is not a dedicated office and the work space is used for multiple purposes (i.e. Dining table).
As always, if you have tax deductible purchases you are considering making, it may make sense to bring these forward to before 30 June.
Likewise, rental property owners may consider bringing forward expenses such as necessary repairs & maintenance so as to gain an immediate tax benefit in the current financial year.
The federal government has increased the instant asset write-off threshold for purchases of business assets between 12 March and 31 December. Eligible businesses can now book an instant, full tax deduction for purchases of individual assets costing up to $150,000 each, rather than the previous $30,000 cap. This applies to both new and second-hand assets, and can be used for multiple assets. The limit for motor vehicles is $57,581 and the write-off-deduction is limited to the proportion of business use.
If you are intending to make any asset purchases within the next 6 months, we recommend considering whether or not this can be brought forward. As always, expenditure should be a business decision, not a tax decision.
Covid-19 collapses have led to a rise in bad debts, and inventory that is obsolete or unsaleable. Business owners can write off these losses and claim a tax deduction. There are special rules for bad debts and a deduction is generally only available if you have done everything in your power to seek repayment of the debt.
To discuss any of the above in more detail, or any other strategies that may apply to your specific circumstance, please contact our office as soon as possible.