The financial year is ending soon. We’ll highlight where the tax office might look closer and how you can claim more deductions.
Opportunities for You
You can take advantage of tax cuts that will come into effect from 1 July 2024 by bringing forward your deductible expenses into 2023-24. If possible, you should prepay your deductible expenses, make deductible super contributions and plan any philanthropic gifts to use the higher tax rate.
Bolstering Superannuation
If you plan to grow your superannuation, and your aggregate superannuation balance allows it, you could make a deductible contribution to your super if you haven’t used your $27,500 cap. It includes SG paid by your employer, amounts you have salary sacrificed into superannuation, and any amounts you’ve contributed personally that will be claimed as a tax deduction. If your super balance was below $500,000 on 30 June 2023, you could access any unused concessional cap amounts from the last 5 years in 2023-24 as a personal contribution.
To make a deductible contribution to your super, your age must be under 75, file a notice of intent to claim a deduction in the approved form, and receive an acknowledgement from your fund before you file your tax return. Individuals aged between 67 and 75 can contribute to super personally if they meet the work test.
If the assessable income of your partner is less than $37,000 and you both meet the eligibility requirements, you could contribute to their super and claim a $540 tax offset.
Charitable Donations
When donating money to a registered deductible gift recipient, you can claim over $2 as a tax deduction. The more tax you pay, the more tax-deductible donation is to you. The donation must be a gift to be deductible, and it shouldn’t be in exchange for something. Special rules may apply for amounts related to charity auctions and fundraising events organised by a DGR.
Investment Property Owners
If you don’t have one already, a depreciation schedule helps you calculate deductions for the natural wear and tear over a period of time on your investment property. Based on your property, it could help to increase your deductions.
Risks
Work from Home Expenses
When you work from home, you are not allowed to claim the expense of your biscuits or morning coffee. However, the Australian Taxation Office is closely examining expenses related to working from home. You can claim work-from-home expenses either using a short-cut method or an actual method.
You can claim a fixed 67c rate per hour you work from home using a short-cut method. It includes your energy expenses, mobile and home phone expenses, internet expenses, and stationery and computer consumables. You must have a record of the actual times and days you work from home to use this method because the ATO will not accept estimates.
The alternative is to claim the actual expenses you spend on top of your normal running costs for working from home. You must have copies of your expenses and your diary for at least 4 continuous weeks that show your typical work pattern.
Landlords Beware
If you have an investment property, you can claim a deduction for expenses you have incurred when earning income. The property should be rented or available for rent to claim the expenses. The major focus for the ATO is when the taxpayer claims investment property expenses when the property was being used by friends or family, which as a result was taken off the market for some reason. There are a few issues the ATO is focusing on this tax season.
Refinancing and Redrawing Loans
You can claim interest on the amount you borrowed for the rental property as a deduction. However, if a portion of the loan relates to personal expenses, or where a portion of the loan has been refinanced to release cash for your personal requirements, then the loan expenses must be apportioned and only the portion that relates to the rental property must be claimed. The ATO will verify data to check taxpayers who are claiming more than necessary for interest expenses.
The Difference between Repairs and Maintenance and Capital Improvements
While repairs and maintenance can be claimed immediately, a deduction for capital works is spread over some years. Repairs and maintenance expenses need to be related to the wear and tear from the property being rented out and involve restoring the property back to its previous state. You can’t claim repairs needed when you first bought the property. Capital works are deducted at 2.5% of the construction cost for 40 years from the date construction was done.
Co-Owned Property
Rental expenses and income must be claimed as per your legal interest in the property. Joint tenant owners can claim 50% of the income and expenses, and tenants can claim it as per their legal ownership percentage.
Gig Economy Income
It is crucial to mention any income earned from platforms, such as Stayz, Airbnb, OnlyFans, Uber, YouTube, etc., in your tax return. Hiding this income from the ATO won’t protect you from paying tax on it. All sharing economy platforms must begin reporting from 1 July 2024.