We all need to have a closer look at our tax affairs for the end of this financial year and as well, start to prepare ourselves for effective planning in the next year. This article is an outline of main points of consideration that everyone needs to think about to help them with their personal planning now and for the future.
- Reasonable work related expenses of up to $300 can be claimed without receipts but notwithstanding, need to be real.
- Bring forward any investment property expenses before the end of the FY so you can claim them this year.
- Pay any interest on fixed interest loans upfront to give yourself a deduction in this current FY.
- If your salary next year will decrease then bring forward your deductible expense.
- If your salary is expected to increase next year then try to defer payments until then.
- Be mindful that CGT occurs on the contract signature date and not on the settlement date.
Working from Home
- Producing assessable income at home and using your home as your office may be assessable to claim expenses thereby allowing for a deduction.
- Look for the following;
- Any depreciation of office equipment
- Home office running costs
- Home office occupancy costs (will impact on main residence tax exemption)
- Office equipment that has shared use between office & non-office must be depreciated in proportion of the business/non-business use.
- Pooling of depreciation assets to claim a deduction, 15% in the first year and 30% in the subsequent years.
- If the asset is used exclusively for business then can claim a full deduction.
- Immediate write-off for most depreciating assets less than $20,000.00.
Home Office Running Costs
- Running costs (expenses) include, power, gas, phone, cleaning.
- Use a diary (minimum record of 4 consecutive weeks) to record the amount of time your home office was used and apply the ATO ‘acceptable Tax Office rates’ @ 34 cents per hour.
- Using your phone for business allows you to claim a deduction for phone rental plus calls, but not installation costs. Again, if the phone is used for a mix of business and personal use then a deduction can be claimed in proportion.
Home Office Occupancy Costs
- Home must be a place of business, not a salaried employee working from home. You must have an area that is dedicated to and set aside exclusively for your business and advertise property as such. Make sure that you have adequate insurance in-place and revue council regulations.
- Expenses may include rent, mortgage interest, land taxes, home insurance premiums, council rates. Again, the same business occupancy percentage can be claimed in relation to the area of your home.
- If claiming occupancy expenses (e.g. mortgage interest depreciation) then you will be expected to account for any capital gain attributable to the business portion of your house when it is time to sell.
- Likewise, the business portion of the home will be subject to CGT although some concessions may apply.
- Claim your deductions. Any expense that your business incurs that is related to making an income can be claimed.
- Don’t forget the instant write off for the purchase of any asset up to $20,000.00 for an immediate 100% tax deduction.
- Interest on Loans – you can deduct the interest charged on the money that your business borrows including Overdrafts, Business loans, etc.
- Interest accrued on your business loan but not paid by June 30th can be claimed.
- A business activity funded through any personal loan or credit card of the business owner can also be claimed with the relevant paperwork.
- Look for deduction value in your trading stock by doing a stock take. If your stock value changes by $5000 you must take this into account when assessing your taxable income for the year. A lower stock value equates to an allowable deduction.
- The different methods available for valuing stock are;
- Price you bought it
- Current selling value
- Replacement value
- Stock write down for damaged/obsolete items
- A deduction can be claimed if your stock values changes less than $5000 by using one of the above methods.
- Keep records of stock write down reasons.
- Make sure that you do not include GST with the value of your trading stock where you are entitled to a GST credit.
- There are various CGT strategies that can be used;
- Crystallise asset losses before 30th June as they may be able to offset any capital gains you make on selling profitable assets.
- Delay crystallising any capital gain until the next FY. Capital gains can be offset against trading losses within the same structure.
- Note, to assist with your forward planning, the disposal of a CGT asset occurs at the date of your contract.
- Accrued expenses can also be claimed;
- Employee end of year bonuses
- Director bonuses
- Identify any bad debts for the year and write them off before the end of the FY to claim a tax deduction.
Chan & Naylor
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.