New work from home deductions : Shortcut method

You can claim a deduction of 80 cents for each hour you work from home from 1 March to 30 June 2020 as long as you:
are working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
have incurred additional running expenses as a result of working from home.

If you use this method, you can’t claim any other expenses for working from home for that period.

Salary sacrifice/ Superannuation – personal deductions

By ‘sacrificing’ some of your before-tax salary and putting it into your super fund, you get taxed at the special rate of 15%. That’s why it’s also known as ‘concessional contributions’ because there are tax concessions with these types of contributions. If you are in the average tax bracket of 34.5% (including medicare levy) you can save 19.5 cents in each dollar you put in your super and if you are in the higher tax bracket you potentially save more money.

If salary sacrificing is not an option you can also make a personal superannuation contribution to your super fund and can claim a tax deduction in your tax return. However please make sure appropriate notice of intent to claim is provided to your super fund and it is very important that you have received an acknowledgement from your super fund. You should check that the total of your personal contributions (for which you are eligible to claim a tax deduction) and any employer contributions during the income year do not exceed $25,000.00.

However, if you earn over $250,000 per year, contributions are taxed at a flat 30%. This is called Division 293 tax. In this situation, you are still able to reduce your tax by making super contributions, just to a lesser extent.

Carry Forward Rule

The carry-forward rule allows you to access any unutilised concessional caps in previous financial years. This rule commenced on 1 July 2018. Therefore, if you did not fully utilise the $25,000 concessional cap last financial year (i.e. 2018/19), and your super balance was less than $500,000 as at 1 July 2019, then you can access the unused portion of the cap this financial year.

$10,000 early release of superannuation

Employees and sole traders economically disadvantaged in the COVID-19 period can make a one-time withdrawal from superannuation of up to $10,000 by 30 June 2020. A further one-time withdrawal of up to $10,000 can again be made from 1 July to 24 September 2020.

You can do this only in certain circumstances, such as being unemployed, receiving JobSeeker or other income support, made redundant, work hours reduced by 20%+, sole trader’s business suspended or turnover fallen by 20%+.

You can apply through myGov, and any amount released is not assessable income to you. This option is generally regarded as a last resort, and you should seek financial advice.

First Home Super Saver Scheme

The First Home Super Saver (FHSS) scheme was introduced by the Australian Government in the Federal Budget 2017–18 to reduce pressure on housing affordability.

The FHSS scheme allows you to save money for your first home inside your superannuation fund. This will help first home buyers save faster with the concessional tax treatment within super.

From 1 July 2017 you can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund to save for your first home.

From 1 July 2018 you can then apply to release your voluntary contributions, along with associated earnings, to help you purchase your first home. You must meet the eligibility requirements to apply for the release of these amounts.

Call me if you need further information

Maximising allowable deductions

Expenses that are incurred before year end can reduce taxable income. Consider upcoming liabilities and the value in incurring them before year end.

If you have a rental property, consider whether you are maximising claims for capital allowance and capital works deduction on the property.

Pay income protection insurance premiums before year end.

Low income earners

The tax-free threshold of $18,200, together with the low income tax offset, means that some low income earners will not need to lodge income tax returns for the 2020 income year.

Superannuation – Government Co-Contribution

If you are a low or middle-income earner and make personal (after-tax) super contributions to your super fund, the government also makes a contribution (called a co-contribution) up to a maximum amount of $500. As there are also other qualifying criteria, please contact me if you wish to access this benefit.

Transition to Retirement Income Streams

If you have reached preservation age, you may be eligible to commence a “Transition to Retirement” pension. Benefits may include:

■ receiving pension income while still working;
■ Ability to salary sacrifice to superannuation to access lower tax rates; and

Spouse Contribution

You may be able to claim an 18% tax offset on super contributions of up to $3,000 you make on behalf of your non-working or low-income-earning spouse.

Property Depreciation reports

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself.
The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

Concessional Contributions

The concessional contribution cap for everyone, no matter their age, is $25,000 for 2019/20. Those with salary sacrifice arrangements in place need to ensure they don’t breach this lower concessional cap and should review/revise their arrangement accordingly.
Also, those employees who cannot salary sacrifice to super are able to make personal contributions and claim as a tax deduction. There are specific notice requirements in place and again, you need to ensure that the total of personal deductible and employer contributions does not exceed the $25,000 limit for 2019/20.
From July 19 you can include unused concessional contributions from the 2018/19 year to increase this year’s concessional contribution cap – but only if the member’s total super balance at 30 June 19 was under $500k.

Non Concessional Contributions

The non-concessional cap for 2019/20 is $100,000. However, for anyone who has a ‘total super balance’ of at least $1.6m as at 30 June 2019, their non-concessional cap is reduced to zero.

For those under age 65 during 2019/20, bring forward rule can be used, where eligible, for non-concessional contributions. However, this also depends on the member’s total super balance at 30 June 2019.

Don’t leave contributions to the last minute

It’s vitally important to ensure that any contributions for 2019/20 are received by the fund no later than 30 June 2020. If contributions are made by internet banking, be aware of the service conditions that apply, the date the transaction will be processed and importantly, when the deposit will show in the fund’s bank account. Where an electronic contribution is made on 30 June 2020, generally, the deposit will not appear in the fund’s bank account until the following day, which is the next financial year (and some banks may not process until the next business day).

Pensions

Ensure that the minimum required age based amount of pension is paid by 30 June 2020.

Transition to retirement pension

Earnings inside a TTR pension accounts no longer receive a tax exemption and will be taxed in the same way as accumulation phase assets at 15%. If you are currently using this strategy, you may need to review it to ensure it is still beneficial for you. Maximum pension allowed is 10% of the opening balance as on July 2019

Downsizing Contributions into superannuation

From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Market valuation of assets

Although this is a simple process for assets that have a quoted market price, like listed stocks and managed funds, if the SMSF has assets that are not on-market, such as real estate and collectables, it’s a good idea to line up the relevant assessors, where needed, early. External valuations may not be required every year, however, superannuation law requires the SMSF trustee(s) to turn their mind to and determine market value for each year’s annual financial statements.

Investment Strategy

Please review your investment strategy as early as possible in July 2020 and make sure it still meets all your objectives and the asset allocation is according to the strategy. It is also a requirement of the SIS act that the strategy is being reviewed regularly.

Ensure you have the right support network

Running an SMSF is not easy, even for the most engaged trustees. The rules can be complex and new and proposed legislation can affect the way the SMSF operates.

But it’s important for SMSF trustees to know that they have the necessary support to manage their SMSF. You might choose to run your own SMSF for control and choice, but it doesn’t mean you’re alone.

Also if you are an SMSF trustee, some of questions to ask yourself:-

• Do I have the necessary records for all of my superannuation contributions and accounts?
• What is the total amount that I have contributed this year (including my super guarantee amounts)?
• Can I make a contribution for my spouse? And is this an effective tax minimisation strategy?
• Were there any contributions from the previous financial year that I can super split into this current financial year?
• Should I consider making any additional contributions before the end of financial year (concessional and non-concessional)?
• Have I withdrawn the minimum pension for the year?
• Is my investment strategy updated?
• Do I have adequate insurance in place?

The above is just a summarised list and all may not be applicable to you. If you wish to discuss any of the matter in details please call Mitesh Modi of MM Consultancy, Chartered Accountants on 02 8277 4313 or email info@mmcpl.com.au

Disclaimer: The material contained is in the nature of general comment and information only and neither purports, nor is intended, to be advice on any particular matter. Readers should not act or rely upon any matter or information without taking appropriate professional advice.

All financial figures are quoted in Australian Dollars unless otherwise indicated.