In this month’s blog we’ll talk about some of the key deductions and superannuation contributions to make the most of this financial year, as well as what the ATO will be looking out for.
When it comes to getting the most (money) from your annual tax return, there is usually a lot to think about, so we’ve identified a few options that could open the door to some opportunities to save on tax.
The key here is to plan ahead.
Deductions — lower your tax liability
- Pay now for some of next year’s expenses
If you have some spare cash available, paying for certain expenses before June 30 could mean you get your tax break back from the ATO earlier. Expenses paid in July could leave you waiting more than 12 months for the return. A popular expense in this category is prepaying interest on an investment loan, but be careful because not all expenses qualify for a tax deduction in advance.
This year the ATO is focusing on work-related expenses. If you are planning to claim expenses for things like a home office, mobile phone, tools and equipment, etc, make sure you claim only eligible expenses and have the paperwork to substantiate them. Each year the ATO are making it a priority to investigate and substantiate individuals and small businesses making excessive claims and deductions. Be sure to have all of your paperwork and proof at the ready.
- Cash back for insuring your income
You can claim the premiums you have paid for your income protection insurance as a tax deduction. Note that you can only claim the portion of the premium that covers you for loss of income, not for any benefits of a capital nature. Premiums for other personal insurance cover such as life, critical care or trauma cannot be claimed. You also can’t claim deductions for premiums that are paid from your superannuation contributions if your policy is held in your fund.
Super contributions — don’t waste the limits
June 30 is not just about deductions for expenses. It’s also a good time to review your superannuation contributions to date and take advantage of the annual caps.
- Salary sacrifice or concessional contributions
The annual limit for these types of tax-deductible contributions is $25,000 per annum, regardless of age. If you’re an employee, this limit covers both employer super guarantee and salary sacrifice contributions.
How much has your fund received in contributions so far this year? Do you need to review and adjust your current arrangements?
- After-tax contributions
Anyone under 65 (whether working or retired) can contribute $100,000 each year to super as after-tax or non-concessional contributions. You can also contribute $300,000 in a single year by bringing forward the limit for the following two years. But when it comes to super, there’s usually a ‘but’. Check your total super balance to ensure any extra contributions do not exceed the general balance transfer cap of $1.6 million for 2017/18.
And one final point on super contributions, the total contributed is based on how much is received by your fund, not when you sent it to the fund. Another reason why planning ahead is crucial.
These are just a few ways to manage how your money is taxed and to keep in mind as we edge towards the end of the financial year. Depending on your circumstances, other options may be available. Your licensed adviser can work with you to help you achieve what is best for you this financial year. But please don’t leave it too late.
www.ato.gov.au: Expenses deductible immediately – management, maintenance, interest; Claiming a deduction for ‘Other work-related expenses’ this year?; Other deductions – Income protection insurance
www.ato.gov.au: Key superannuation rates and thresholds; Withdrawing and paying tax – Non-concessional contributions; Concessional contributions