EOFY Series – Individual Edition

Happy new financial year!

The tax season for many, often feels like a daunting process but we hope to make it less stressful with some useful information below.

Income Statements (formerly referred to as PAYG Summaries) – After 30 June 2021 your employer will finalise your income statement for the last financial year. Most employers have until 14 July 2021 to finalise their payroll data. With the ATO’s response to Covid-19 this date has been temporarily extended to 31 July 2021.

It is recommended to wait until your income statement has been marked as “Tax Ready” prior to lodging your tax return. A useful tip is to compare your final pay slip year to date (YTD) amounts to your final income statement. Where there is a variance, it’s worth querying any differences with your employer.

Work related expenses – When claiming work related expenses, it is important to keep relevant records and ensure you do not claim any expenses that have been reimbursed by your employer.

Work related car expenses – You can claim work related expenses for using a car that you owned, leased or hired (under a hire purchase agreement). You can choose between two methods listed below:

• Cents per Kilometre method (72 cents per Km in 2021 financial year) – Your claim is based on a set rate for each business kilometre travelled (capped at 5,000 business kilometres per car, per year). Written evidence is not required but you must be able to show how the kilometres were calculated.
• Logbook method – Your claim of motor vehicle running costs is apportioned according to the business use percentage. You will need to have a valid logbook (covering at least 12 continuous weeks) to support the business use claimed. The logbook will remain valid for 5 years as long as the usage of the vehicle does not significantly change. Please refer to the ATO website for more information on what you need to include in your logbook.

Working from home – In response to Covid-19, the government introduced the Shortcut Method (80 cents per work hour) of claiming home office expenses. This method has been extended to 30 June 2021, but did you know this is actually one of the three methods? Each method has a different rate and eligibility requirements as listed below:

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1. Shortcut Method (80 cents per work hour) – This method doesn’t require you to have a dedicated work area, but the rate covers all additional deductible running expenses including:

• Electricity
• Decline in value of capital items such as home office furniture, laptop, computer etc.
• Cleaning
• Phone costs
• Internet Costs
• Computer consumables

You will need to ensure you have evidence of hours worked like a timesheet or diary. For more information on this method please refer to the ATO website.

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2. Fixed Rate Method (52 cents per work hour) – To use this method you will need to have a dedicated work area such as a home office that you work from. This rate covers the following deductible running expenses including:

• Electricity
• Decline in value of capital items such as home office furniture.
• Cost of any repairs to your home office equipment and furniture.

If you have incurred any of the following expenses, the work-related component can be claimed in addition to the 52 cents per work hour:

• Phone expenses
• Internet expenses
• Computer consumables and stationery
• Decline in value of equipment such as computers, laptops, phones etc.

For more information on this method you can refer to the ATO website.

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3. Actual expenses method – The actual method allows you to claim the actual expenses you incur (and reduce the claim by any private use). To use this method, you will need to retain records such as receipts and a diary representative of a four-week period as evidence of your usual pattern of working from home.

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Work related clothing – You may be entitled to claim a deduction for work related clothing if it relates to any of the following:

• Occupation-specific clothing
• Protective clothing
• Compulsory work uniforms
• Non-compulsory work uniforms

Please note this excludes conventional clothing (i.e., clothing worn by people regardless of their occupation). For more information please refer to the ATO website.

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Donations – In order for a donation to be tax deductible it must be made to an organisation that has a Deductible Gift Recipient status as not all charities are registered for this. You can check the DGR status of an organisation by entering their ABN via this link.

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Rental properties – If you own a rental property, you will be required to gather your annual rental property statement (if managed by an agent) or collate your rental receipts and payments.

For any repairs and maintenance to the property, you will need to distinguish between whether the payment was for a genuine repair or a capital improvement as they have different tax treatments.

• A repair is work completed to fix damage or deterioration with the purpose of keeping it in the same condition as when it was purchased. The cost of a repair is generally deductible (in full) in the year you incur them.  
• A capital improvement is a structural repair that substantially improves or enhances the property. The cost of a capital improvement is generally deductible over a number of years.

We hope you have found the above information useful. If you have any questions, please give us a call on (02) 9821 2455.

Don’t forget to download our End of Year Tax Checklist (found in our resources page) which will help you this tax time.