Tax deductions: Where to find them before July 1
The financial year ends on Tuesday, so there’s no time to waste if you want to book bigger tax deductions or make other money moves.
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It’s a few minutes to midnight in the 2019-20 financial year as consumers and investors have less than two days to make their money moves.
Some people may already have missed the boat for superannuation contributions, but plenty of other strategies remain on the table to save money, get bigger tax refunds or avoid unnecessary penalties.
And now is the final countdown.
“With many Aussies under increased financial pressure, this year it’s more important than ever to make sure you aren’t paying more tax than you need too,” said comparison website iSelect’s spokeswoman, Laura Crowden.
“It’s not too late to maximise your tax return with some last-minute charitable donations, sorting out your insurance or purchasing some new work equipment.”
PRIVATE HEALTH CHECK
“If you are a higher income earner or about to turn 31, you should consider taking out hospital cover before June 30,” Ms Crowden said.
“For higher income earners, having private hospital cover helps avoid paying extra tax due to the Medicare Levy Surcharge while for those about to turn 31, it means you’ll beat the Lifetime Health Cover deadline and won’t be stung with higher premiums later in life.”
Consider giving your health cover a check-up.
OTHER INSURANCE
Most insurance is not tax-deductible for individuals, but some policy types are.
Landlords insurance is one of them, and property investors can prepay a year in advance if they wish to book the deduction for this financial year.
Another deduction is income protection insurance for people who own their policies separate to their super funds.
“Many people don’t realise that income protection insurance premiums are generally tax deductible,” Ms Crowden said.
“The amount you’ll get back varies but depending on your circumstances, it could mean a significant reduction compared to the original premium paid.”
Ms Crowden said deals for switching insurance companies before June 30 included eight weeks free, airline points and gift cards.
SUPERANNUATION
Super offers a smorgasbord of benefits for people who make extra contributions before the end of the financial year – including the $500 government co-contribution, a $540 tax rebate for spouse contributions, and tax refunds flowing from before-tax contributions such as employer payments, salary sacrifice and personal deposits.
JBS Financial Strategists CEO Jenny Brown said some super fund members could still make contributions to lower their tax “as long as it hits the bank account of the super fund by June 30”.
“A lot of super funds have cut-off dates so you really need to check with your fund,” she said.
Ms Brown said electronic fund transfers should hopefully arrive the next day but some clients were finding this wasn’t happening.
“It can’t just have left your bank account – it must be receipted by the super fund,” she said.
SPENDING SURGE
A boom in work-related expenses is under way as millions of Australians work from home this year.
The Australian Taxation Office is letting home-based workers claim a special COVID-19 tax deduction of 80c per hour worked at home between March 1 and June 30.
Alternatively, workers can keep a record of all expenses and apportion them between work and private use.
Depending on your job, work-related deductions might include subscriptions to journals and newspapers, stationery and printer supplies, technology such as cameras and headsets, software, office chairs, protective floor mats, and phone and internet plans.
“Anything you can get a tax deduction for you could prepay or purchase it before 30 June,” Ms Brown said.
“A lot of electronics retailers have a lot of good sales.”
SELLING SHARES
Huge volatility in the sharemarket in 2019-20 has delivered investors some large capital gains and large capital losses.
Anyone who booked big profits as markets soared to record highs in February could help offset their capital gains by selling dud shares before June 30.
This could help prevent them paying more capital gains tax than they need to, and an EOFY share portfolio clean-out can also lower future capital gains.
“Tax losses can be carried forward into future years, but a capital gain is taxed in the year it occurred,” Ms Brown said.
LANDLORD STRATEGIES
Residential real estate investors have a huge range of potential tax deductions, and the ATO has a free Rental Properties 2020 guide at ato.gov.au to help them understand what’s deductible and what isn’t.
Common deductions include interest on investment loans, which can be prepaid up to a year in advance, landlords insurance, property agent fees, council rates and the decline in value (depreciation) of fixtures and fittings.
KPMG tax partner Mardi Heinrich said the rules around depreciation changed in 2017 to stop deductions for second-hand assets acquired in investment properties, but investors who bought new items and buildings could continue to claim.
“Engage a quantity surveyor to make an assessment and prepare a depreciation report to outline amounts to be claimed in your tax return each year,” she said.
“The cost of having a depreciation report prepared is also deductible.”
Spending on property repairs or maintenance before July 1 is deductible for the 2019-20 financial year.
DONATE GENEROUSLY
Money donated by tomorrow night gives you an immediate tax deduction.
“Ensure you have picked up all donations made during the year to deductible gift recipients,” Ms Heinrich said.
“Taxpayers may make donations over the course of the year but often forget to claim them because they forget to keep a record.
“With increased use of electronic receipting via email, the ability to locate the receipts in the digital world has become easier.”
Originally published as Tax deductions: Where to find them before July 1