Individuals always go through the most amount of changes when it comes to tax Law and associated rules. Many of these are subtle (such as minor changes to rates and thresholds), and some that are really important to know get lost in the “noise”.
This article will highlight some of the important recent changes, but also some often forgotten rules that are important to follow.
TAX RATE CHANGES
- The “low to medium income tax offset” that was a bonus $1,080 given to many people last year will be provided for again this year. You don’t need to do anything except lodge a tax return; and
- The immediate write off for asset purchases is not available to salary and wage earners, rental property owners, and some contractors – only businesses are eligible.
LAST MINUTE TAX TIPS
If you’re looking for little nuggets of gold for saving tax at the last minute, have a read of our EOY Tax Tips brochure.
If you are a contractor with an ABN, please don’t automatically think you are a “business” in the eyes of the ATO and can make all sorts of claims such as writing off car purchases in full and all of your travelling to and from work.
These “business” deductions are only available to contractors that fit the ATO’s definition of a business. We highly recommend reading our Is Your Contractor A Contractor brochure to give you an idea as to when a contractor is considered a “business”. The brochure is aimed at busineses using contractors (to work out if they should be paying super and other entitlements), but the concept is there.
The media tells us there are billions of tax dollars going missing by not taxing multi-nationals, but the ATO estimates that significantly more tax dollars is lost by contractors and individuals doing the wrong thing.
Have a guess where the ATO’s next focus point is?
SUPERANNUATION CONTRIBUTIONS DEADLINE
If you are looking to claim a contribution to super as a tax deduction, it needs to be in the bank account of your superannuation fund and processed before 30 June. Transfers done on 26 June that appear on 1 July are not deductible until next year. We recommend allowing 7 days for the super funds to process contributions.
You also need to complete an Intent to Claim notice and provide it to your superannuation fund (which can be done at a later date). Most public super funds will send you a form later in the year.
SUPERANNUATION CONTRIBUTIONS CAP
To prevent “wealthy” people taking advantage of the low tax rates in superannuation, people are capped at the amount they can contribute into superannuation. For “tax deductible” contributions, this cap is $25,000 per year.
This amount includes all contributions made by your employer, so if you are looking to put some of your savings into super, the amount you can put in may be less than this. To work it out, ask your employer (or check your superannuation fund) how much they have contributed and deduct this from $25,000.
To complicate this further… you are also allowed to make a “catch up contribution” and claim a tax deduction for this. Essentially if you didn’t use up the full $25,000 last year, you may be able to use that unused portion this year.
If you are interested in taking advantage of this, you need to chat to your accountant as there are some conditions and you need to ensure you get the balances correct.
With COVID, the ATO are expecting a reduction in travel deductions claimed, particularly from people in industries where working from home was probable (and indeed an increase in home office deductions should signify a reduction in travel deductions). You can read about what travel expenses are claimable in our travel expenses brochure, and also on the ATO website.
As a side note, working from home (even on a COVID-permanent basis) does not make your home a “place of business” and travel from home to work remains not claimable.
HOME OFFICE DEDUCTIONS
The ATO is expecting home office deductions to increase this year and they have said they will be scrutinising those deductions. The COVID shortcut method of 80c per hour is available for the 2021 year, and we note that this includes deductions for the following:
- Use of your utilities (electricity, gas, etc)
- Use of your furniture and equipment (desks, chairs, computers, etc)
- Use of your home internet
- Use of your mobile telephone
There is also a 52c per hour rate that excludes internet and telephone.
You can choose to claim each home office expense individually, but doing so requires you to calculate your usage of each (and for electricity it involves calculating the actual electricity consumption of your computer etc). We generally find using the shortcut method the most suitable.
GOING DIGITAL WITH THE ATO
The ATO is moving digital and we are seeing more and more instances of the ATO only setting letters and notifications to your MyGov Inbox. If you don’t have one, or are not using yours, then you risk missing those letters. Importantly, tax instalments are sent to your MyGov account and no longer mailed and we are being contacted by many clients wondering why the ATO are issuing demands for payment for a debt they have never seen.
We’d love to tell you we can ask the ATO to revert you back to paper. We’d love to say that we can get them sent to us – but we can’t. It’s MyGov or nothing unfortunately.
Below are some links to information about setting up and using your MyGov account:
- Online services in general: https://www.ato.gov.au/general/online-services/
- Creating a MyGov account and linking it to the ATO: https://www.ato.gov.au/General/Online-services/Create-your-myGov-account-and-link-it-to-the-ATO/, or watch the ATO’s YouTube video at https://www.youtube.com/watch?v=1t7shuGoNL8
- Using online services: https://www.ato.gov.au/General/Online-services/Using-ATO-online-services/
- The “MyGov Inbox” (where ATO letters are sent to): https://www.ato.gov.au/general/online-services/in-detail/mygov/ato-and-the-mygov-inbox/
This brings us to MyGovID (note the ID on the end). Almost as if named deliberately this way to confuse you, MyGovID is completely separate to MyGov.
MyGovID is your “digital ID” for dealing with the Government. Currently you can log in to most services with a username and password – this will all be phased out and replaced by MyGovID and in the future you will use MyGovID to log into everything.
You can read all about it at https://www.mygovid.gov.au/, including how to set it up (https://www.mygovid.gov.au/set-up) and linking your MyGovID with your MyGov account (https://www.mygovid.gov.au/using-mygovid-mygov).
YOUR 2021 TAX RETURN
We have published our 2021 individual tax return guide that goes through what you can and can’t claim, what evidence we expect to see, and what the ATO expect you to keep. We recommend having a read of this before sending your information across to us.
If you do not need to lodge a tax return because you earned under the tax free threshold, then you still need to notify the ATO of this. A simple phone call to the ATO is normally sufficient, or we can lodge a “no return necessary” form on your behalf (upon request). Please view the ATO’s webpage on this topic for more information.