Tax Tips: End of year tax tips

Written by: Evan Lowenstein

IMPACT OF COVID-19

Last year our minds were dominated by the advent of COVID-19 and how to deal with the myriad issues that arose due to the pandemic.
This financial year we are seeing some improvement in the overall economy but combined with the removal of government assistance packages, we are still being impacted by COVID-19, as the last fourteen days in Victoria have shown. One never knows what is around the corner.
Even if COVID-19 was not so present, the same tax issues apply. For businesses, cash management will likely still be at the top of the financial agenda.
As a key strategy, it is essential for business owners not to feel overwhelmed or rushed into selling up or closing doors. It may be more effective to take a look at alternative methods of income.
For some businesses year-end planning will bring with it challenges about to how to best manage your business in the COVID-19 environment.
For some businesses it may be advantageous to reduce stock by selling it at reduced prices or selling old pieces of equipment, that would bring to account potential losses on selling assets and this strategy offers some tax advantages.
In addition the federal government has been spruiking its extended instant asset write offs that allows eligible businesses to write off in one hit any amount that is spent on equipment.
It may be prudent to examine old debts and see if they could be written off as ‘bad’ but take heed that certain care has to be taken here.
In addition, it may also be a good idea to see if one can legally afford to defer income from one year to the next, this is quite a tried and tested method but again, care must be taken.
Clients should be aware that superannuation deductions can only be claimed if the contributions are made by the 30 June 2021.They must have been received by the superannuation fund by that date and a form – called notice of intention to claim must be completed by the client and sent to the fund. A return acknowledgement by the fund must be received in order to make the claim.
For some of our clients who are in pension phase, they need to ensure that the correct amount has been withdrawn from their fund by the 30 June 2021 as well.
With many people still choosing to work from home despite the lifting of restrictions, it may be the case that claims for home office expenses will rise. The ATO is sure to be alert to this and will no doubt review claims carefully. Expenses in question may include:

• electricity expenses associated with heating, cooling and lighting the work area;
• cleaning costs for a dedicated work area;
• phone and internet expenses;
• computer consumables (eg, printer paper and ink) and stationery; and
• home office equipment, including computers, printers, phones, furniture and furnishings (taxpayers who are employees can claim either the full cost of items up to $300 or the decline in value for items over $300).

As we know, the ATO has advised that taxpayers will be able to use a simplified method to claim home office expenses at a flat rate of 80 cents per hour based on the estimate of a record of hours spent working from home. Good way to do this is to keep a diary. It may be the case that claiming the actual expenses method may produce a better tax result for some clients.

This shortcut method has been extended to cover the current financial year of 20/21.

It is sensible to seek advice from one of our accountants before embarking on any of these strategies.