With the end of the tax year approaching , now is the time to see what you can do to minimise your tax for 2021. This would mean more money in your pocket for you and your family to enjoy and put some fun back into the tough year it has been.
Home Office Expenses during Covid-19
If you worked at home because of Covid-19 you will be able to claim a special deduction of $0.80 per hour worked. This covers all office expenses and you will need a record of how you calculated the number of hours. The important aspect is that you do not need a dedicated work area such as a home office.
The other method which has been around prior to Covid-19 that DOES require a dedicated work area, is the fixed rate method that allows $0.52 per hour worked to be claimed.
In addition you can also claim phone, internet and computer consumables and decline in value of equipment.
A third method that can be used, is the actual cost method. This would require a home office that no other members of the household use and you would need to know for example how much electricity is used for business. The record keeping for this method is extremely onerous.
You can contribute into super as a deductible contribution up to $25 000 including your employer contributions if you are under 75 years. For next year, 2022, this will increase to $27 500.
In order to claim this amount as a deduction against your income, you would need to give your fund a notice of intent form and receive an acknowledgment letter from your fund.
These contributions would then be taxed at 15% in the super fund if your income is less than $250 000 or at 30% if above this amount.
Carried forward contributions to super
If you don’t use the full amount of your contribution cap of $25 000 starting from the 2019 year, you can carry forward the unused amount and use the previously unused amounts for up to five years as per the table below.
|In this income year …||… unused caps from these years can be applied|
|2020–21||only 2018–19 and 2019–20|
|2021–22||only 2018–19 to 2020–21|
|2022–23||only 2018–19 to 2021–22|
|2023–24||only 2018–19 to 2022–23|
|2024–25||only 2019–20 to 2023–24|
Spouse Super Contributions
If your spouse’s income is less than $37 000 p.a and you make a contribution into their super account of up to $3 000, you will receive a tax offset of $540.
This offset reduces to nil as their income increases to $40 000 p.a
Government Co-Contribution to super
The government will pay into your super account $500 if you make a non-concessional contribution of $1 000 into super and you earn less than $39 837 in 2021.
This means that you do not claim this contribution as a tax deduction against your income.
At least 10% of your income needs to be from employment or business income.
The Co-contribution will decease if less than $1 000 is contributed and as your salary increased up to $54 837.
Property Depreciation Report
If you own an investment property, you will be able to claim depreciation on new equipment and the building structure ( Capital Works), if you have a Depreciation Report. (prepared by a Quantity Surveyor only)
The report costs a few hundred dollars which is a deductible expense, but results in thousands of dollars of non-cash flow deductions over the years.
Motor Vehicle Expenses
In order to claim motor vehicle expenses against your salary income, you would need to prove that you have done travelling for work purposes.
The way to do this, is to keep a record or logbook of your travel for at least 12 weeks during the year. This record is valid for 5 years unless your travel pattern changes before then.
You should also record your odometer reading at 30 June 2021.
The percentage of work travel would be calculated from this record and applied to the total of your motor vehicle expenses and claimed as a deduction.
An alternative method where no log book is needed, is to simply claim up to a maximum of 5 000 km business travel, based on a reasonable estimate, using the cents per km method. For 2021, 72 cents per km can be claimed.
If you own investments such as shares or property, and you pay up to 12 months in advance of interest on a loan or other expenses before 30 June 2021, you will be able to claim these amounts in the 2021 tax year.
Other expenses might be property repairs,memberships,subscriptions or journals.
Income Protection Insurance premiums
If you are unable to work as result of sickness or an accident, Income Protection Insurance will replace up to 75% of your salary. These premiums are tax deductible and protect your family’s lifestyle.
These premiums can also be prepaid for up to 12 months and claimed as a deduction in 2021.
Realise Capital Losses
You can reduce the tax you pay on capital gains by selling any loss performing capital assets before 30 June 2021, so that you can deduct these losses against any capital gains.
Any unused capital losses can be offset against future capital gains.
Defer Investment Gains
Arrange for the contract date of sale of a Capital Gain asset to occur after 30 June 2021 as then the gain will fall into the 2022 tax year.
The contract date and not the settlement date is the key date for working out when a sale occurs.
Should you have any questions specific to your situation, contact us at firstname.lastname@example.org or contact Accolade Accounting on (08) 6263 4466 or (03) 9524 3145 to get further advice.