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Your Essential 2019 EOFY Checklist - Franc Mark Sterling

Your Essential 2019 EOFY Checklist

No one wants to pay more tax than they need to or face unnecessary risks. We’ve compiled a list of our top tips for you.

Superannuation Opportunities before EOFY

 Maximise super contributions

Ensure that you have maximised your annual concessional (tax deductible) and non-concessional (undeducted or after-tax) super contributions. The following summarise the contribution caps for the current financial year:

Concessional contributions

The general concessional contributions (CC) cap for 2018/19 is $25,000 for all individuals regardless of age.

For those aged under 75 (including those aged 65 to 75 who meet the work test) the concessional cap can be made up of compulsory employer contributions made on your behalf (9.50% SGC), salary sacrifice payments and personally deductible contributions made into your super fund. However, if you are over the age of 75, only mandated or compulsory super guarantee contributions are permitted.

Those “earning” (as defined by the ATO) more than $250,000 will pay an additional 15% contributions tax on their concessional contributions.

Personal Deductible Contributions (Concessional Contributions)

Most people aged under 75 years old (including those aged 65 to 75 who meet the work test) can claim a tax deduction for personal super contributions made into their super fund before 30 June 2019, providing that their total concessional contributions from all sources (including super guarantee & salary sacrifice) does not exceed the concessional contribution cap of $25,000.

If you are eligible to make a concessional contribution in which you are able to claim a tax deduction, you need to ensure that you have notified your super fund in writing of your intention to claim a tax deduction and you should also ensure that you receive an acknowledgment of your intention from your super fund.

Carry-forward your Concessional Contributions Cap

From 1 July 2018, you can roll forward any unused concessional cap for five years (after which they expire). So, if you don’t use the full amount of your $25,000 concessional contributions cap in 2018/19, you can always carry-forward the unused amount and take advantage of it up to five years later. This is provided your total super balance is less than $500,000 on 30 June of the previous financial year.

The first financial year where you can access unused concessional contributions is the 2019/20 financial year.

Non-concessional contributions

For those aged under 75 (including those aged 65 to 75 who meet the work test) the non-concessional cap is $100,000 for 2018/19. Those under 65 who have a superannuation balance of under $1,600,000 may be able to trigger the ‘bring-forward’ rule. This rule allows the member to bring-forward two years’ worth of non-concessional contributions and add it to the current year’s cap, meaning the maximum non-concessional contribution available for the year is $300,000.

The contribution and bring-forward amount available to members under 65 is outlined in the following table.

Total Superannuation Balance Maximum non-concessional contribution cap and bring-forward amount available
Less than $1.4 million Access to $300,000 cap (over 3 years)
Greater than or equal to $1.4 million and less than $1.5 million Access to $200,000 cap (over 2 years)
Greater than or equal to $1.5 million and less than $1.6 million Access to $100,000 cap (No bring-forward period, general non-concessional contributions cap applies)
Greater than or equal to $1.6 million Nil

From 1 July 2019, individuals aged 65 to 74 years with total superannuation balances below $300,000 can make voluntary contributions to superannuation for up to 12 months from the end of the financial year in which they last met the work test.

Also note your super contribution will not be counted for this financial year unless the payment is received by your super fund prior to 30 June 2019, which this year falls on a Sunday. So, you must ensure your contributions are paid by 26 June 2019 at the latest.

 Super Co-Contributions (Money for free)

If you are a low or middle-income earner and make personal after tax (non-concessional) contributions to your super fund, the federal government will also make a contribution up to a maximum of $500.

For those under age 71 at the end of the financial year, to receive the co-contribution your total income must be less than $52,697 in the 2019 financial year. This is provided that you earn at least 10% of your income from a job or business & have a total superannuation balance of less than $1.6million.

The maximum co-contribution is available for those who contribute $1,000 and “earn” $37,697 or less a year. A lower amount may be contributed for those who contribute less than $1,000 and/or earn between $37,697 and $52,697 a year.

Keep in mind that “earnings” include assessable income, reportable fringe benefits and reportable employer super contributions.

Spouse Super Contributions

If one spouse, who is under age 65, is not working or earns a low income, and has a total superannuation balance of less than $1.6million, couples may want to consider making an after-tax contribution into their super account.  This strategy could potentially benefit the low-earning spouse’s super account which gets a boost as well as the higher-earning spouse as they may qualify for a tax offset of up to $540.  The offset also applies for a spouse between the ages of 65 to 70 if they meet the “work test”.

The full offset is available for those who contribute $3,000 and the spouse “earns” $37,000 or less a year. A lower tax offset may be available for those who contribute less than $3,000, or the spouse earns between $37,001 and $40,000 a year.

Keep in mind that “earnings” include assessable income, reportable fringe benefits and reportable employer super contributions.

Draw your minimum pension before year end

If you are already drawing a superannuation pension, please ensure that your fund has paid you the minimum pension before 30 June 2019.  The minimum pension for the year is based on a percentage of your fund member balance as at 1 July 2018, or, if you started your pension during the year, the fund member balance at commencement pro-rata for part year.

There is no maximum annual limit to your account-based pension, unless you are under age 65, still working and drawing a Transition-to-Retirement pension from your super fund, in which case the maximum annual limit is 10%.

Other Opportunities before EOFY

Donate

If you are going to donate to charity, now is the time. Any donations you make to deductible gift recipients can be deducted this year. Remember, if you received something in return for the money, like goods purchased at a charity auction, you may not be able to claim a deduction for the full payment. There are special rules dealing with this situation that need to be taken into consideration.

Work related deductions

You can claim a deduction for business expenses you have incurred that have not been paid by your employer. But be careful, you need to be certain that what you are claiming is a genuine business expense and able to be claimed. For example, you cannot claim the cost of dry cleaning the clothes you wear to work unless it is protective clothing, a uniform required by the business, or occupation specific clothing (like the checked pants chefs wear).

Deductions for items like laptop bags have been in the news recently because some handbags can be used to carry laptops. This does not mean that your Gucci bag is suddenly deductible. It is really up to you to justify the deduction that you are claiming, keeping records of the actual usage of the item can help with this.

Instant asset write-off rises again

The Instant Asset Write-Off Scheme has been extended to 30 June 2020 for assets purchased under $30,000. The scheme covers small to medium businesses with a turnover of up to $50 million a year, allowing business owners to immediately deduct assets costing up to $30,000 which can then be claimed for tax return in that income year.

The new rules have applied from 2 April 2019 and are set to remain in place until 30 June 2020. This extension was introduced in the 2019-20 Federal Budget, increasing the write-off threshold and eligibility criteria.

The threshold applies on a “per asset” basis, meaning that eligible businesses can instantly write off multiple assets. There are certain assets that are excluded from the scheme so it is best to check with your accountant or financial advisor. While the Instant Asset Write-Off Scheme reduces the tax your business has to pay, it is not a rebate! Your cash flow will still have to be sufficient enough to support any purchases.

Ways that assets are purchased, such as lease or borrowing methods, may affect eligibility for the scheme. This change will not supersede the previously announced threshold increase that allows businesses to immediately deduct purchases of eligible assets costing less than $25,000. The $25,000 increase applied from 29 January 2019 until budget night (2 April 2019) whereas the new $30,000 increase applies from budget night until 30 June 2020.

Tax Tips for Property Investors

Bring forward any maintenance expenditure that will need to be completed by 30 June but be careful to distinguish between what the ATO considers a ‘repair’ and an ‘improvement’, as improvements are non-deductible (but can be depreciated – see next point).

A depreciation schedule can be provided by a qualified quantity surveyor, outlining the tax deductions that are available and help to provide a significant return. The cost of a depreciation schedule is also tax deductible.

Prepay interest on property investment loans if you have adequate cash flow in order to claim an immediate deduction. Investors may choose to pay interest in advance in order to simplify finances by making one prepayment of interest upfront or protect against possible interest rate rises over the 12-month period.

The ATO requires you to keep up-to-date records of things such as proof of earned rental income, all incurred expenses, periods of private use by you or your friends, periods the property was used as your main residence, loan documents and efforts to rent out the property.

However, note that rental property owners are being warned to check their claims are correct before lodging their tax return, with the ATO announcing plans to double the number of audits it will be conducting on deductions linked to rental properties. Failing to declare income received from renting out a room in your home via an online platform like AirBnB is also a good way to get the tax man’s attention this year.

The ATO will be focussing on over-claimed interest, capital works claimed as repairs and incorrect apportionment of expenses for holiday homes, as well as taxpayers omitting income earned from accommodation sharing.

As part of the crackdown, the ATO is using sophisticated analytics and third party information from banks, rental bonds and online accommodation booking platforms to “scrutinise every tax return”. During an audit, the data searched could include your utility bills, tolls, social media and online content.

Home office running expenses and electronic device expenses

The ATO has released an updated version of Practice Statement PS LA 2001/6, its guidance on calculating and substantiating home office running expenses and electronic device expenses that are claimed as tax deductions. The basic principles have been amended to emphasise that you must actually incur the expenses you claim, and that there must be a real connection between your use of a home office or device and your income-producing work. On the other hand, the requirement that your income-producing use must be substantial – not merely incidental – has been removed.

General Comments

If you are concerned about how any of the above may affect you, please contact your tax professional or financial adviser.

Source: Written by John Wickenden, Chartered Accountant, June, 2019.

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