It always takes some planning to get your finances in order for the end of financial year, and this year may look a little different, come June 30. The COVID-19 pandemic may have impacted your circumstances and therefore your situation could be looking different to normal.
Perhaps you have been working from home, your wages may have reduced or been boosted by government payment support, or you have had to make major financial decisions as a result.
Here are things to consider to ensure you’re on the front foot come June 30:
Bring forward expenses
If you are in a position to do so, bring forward any expenses. This means if there is a work expense that you know is pressing but you have put it off, go ahead and organise it now. You will then be able to claim the deduction in this financial year rather than wait until next year.
This may not be possible for many businesses and individuals in the current climate, but it’s worth keeping in mind if this is an option for you.
Working from home may have made you realise you need to upgrade your home computer or invest in new office furniture. Making your purchases before the end of the tax year will not only impact your tax sooner rather than later, but you can take advantage of EOFY sales.
If you have any invoices that are due before June 30, pay them so they are included in your records.
Write off bad debts
Have a look through your outstanding invoices and identify any that have been outstanding for quite a while. If you have chased them up already a few times and it looks unlikely they will be paid, simply write it off.
Working from home deductions
Whether you’re used to working from a home office or have been forced to due to COVID-19, it’s good to be across what you can claim on tax.
Given that working from home is a new situation for many, the ATO has made it easier to claim deductions. You won’t have to submit a detailed logbook, as you can now claim a deduction of 80 cents for each hour you work from home due to COVID-19. Therefore you only need to keep track of the hours you work from home, without the detailed record keeping.
There are a couple of provisos with this ‘shortcut method’: the work needs to be fulfilling your employment duties (not simply checking your email every now and then) and you must have incurred additional deductible running expenses as a result of working from home. These home deductions must be directly related to earning your income – as tempting as it is to claim Netflix as a research tool, unless you’re a television critic this is unlikely to fly!
You need to keep records of your expenses and be able to show that you, not your employer, has paid for them. You must also include any allowance you receive from your employer as income on your tax return. Be mindful that the ‘shortcut’ method may not be the best for your circumstances and it may be worthwhile, if a little more laborious, sticking to the old method. For more information on working from home deductions, head over here.
Boosting your super
While the COVID-19 situation has seen some dipping into their superannuation, if you’re able to, it’s always a smart idea to use the end of financial year to give your super a bit of a boost as even the smallest amount can really add up over time.
There are many ways of growing your super to think about, including;
- Making tax deductible contributions.
(If you are paying your Super through Xero, you will need to do so by 24th June to allow time for processing).
The super must hit your Super account by 30th June 2020.
If you are making a super contribution you also need to fill in an intent to claim form which can be found here.
- Salary sacrificing up to your $25,000 annual cap.
- The low income super tax offset is available to those who earn $37,000 or less a year, and means that if you or your employer contribute to your super, you may be eligible for a tax offset of up to $500 per year.
- The spouse contributions tax offset means you may be able to claim an 18% offset (maximum of $540 offset) on contributions up to $3000, that you make on behalf of your non-working or low-income-earning partner.
Pay any outstanding employee Super
Your employees superannuation is due at 4 times throughout the year (July, October, January and April).
It is very important that these are each paid on time, as the ATO are really starting to crack down on late payments. Even one day late can result in a fee.
It is also unfair to your staff to have unpaid super, but we don’t need to tell you that.
If you have any outstanding super payments, it’s time to process these.
In order to get the deduction, payments must reach Super accounts by 30th June 2020, which means you will need to transfer by 24th June to allow time for processing).
Ensure your Xero is reconciled, this should be obvious 🙂
In previous financial years, it was necessary to give each employee a PAYG Payment Summary outlining the income & tax they have earned throughout the year so they can lodge their tax return. With the rise of online technology and Single Touch Payroll, for most businesses this is no longer necessary.
You do however need to make sure all your pay runs have been posted, and your STP has been filed. This is so that all information can flow through to the ATO.
If we handle your end of year payroll, continue posting and filing your payruns as normal and we handle your STP finalisation.
Cut back on unnecessary items
While you are looking at your finances, it’s is a good time to evaluate your income and expenditure. Now is the perfect time to look at your insurances, utilities and expenses, and see if there are any that are no longer relevant and cut back on what you can, or contact your provider for a better rate.
Talk to your Accountant
If you have been offered a tax planning session with your accountant, take them up on their offer.
We pride ourselves on our tax planning sessions with our packaged business clients as they are so valuable.
Sign up to our newsletter
Sign up to our monthly newsletter to receive due dates, news, tax tips and other important things that we think are useful and interesting throughout the year.
This article was partly written by a third party, and partly written by us.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.