It’s tax season: what you need to do before the end of the financial year
17 June 2020
It’s hard to believe it, but we’re already approaching the end of the financial year (EOFY). It’s time to turn your attention to your taxes and to maybe take advantage of some EOFY sales.
Before the financial year ends, it’s important to make sure you closely monitor your tax burden and your super. This is also a crucial time for making strategic decisions about your saving strategies.
Here’s how to prepare for tax season before EOFY.
The countdown to the end of the financial year is on. Here’s what you need to know.
When is EOFY?
In Australia, the financial year ends on 30 June, and a new year starts on 1 July. Some businesses may choose to report and emphasise different dates for their financial year. However, for tax purposes, EOFY is the official closing date for any liability that has accumulated over the previous 12 months.
While you have until October to lodge your taxes, conscientiously preparing for EOFY is a good way to practice responsible money management strategies.
The first thing individuals need to do to prepare for EOFY is to familiarise themselves with any changes to the tax code that have taken place. If new legislation has gone into effect during the previous financial year, you’ll want to readjust your tax strategy accordingly.
Given the economic difficulties that have resulted from the COVID-19 pandemic over the past few months, there are some unique changes to note about the financial year ending on 30 June 2020.
Specifically, this year, the Australian Taxation Office (ATO) has created a shortcut for claiming deductions related to work-from-home expenses between March and June. If you incurred additional expenses while working remotely, under many circumstances, you can claim a deduction of 80 cents per hour worked during the established time frame.
Also, as with the financial year ending in June 2019, the low- and middle-income tax offset will continue for this financial year.
Assess your tax situation
Once you’ve caught up with the recent updates from the ATO, you can prepare further for EOFY by taking a closer look at your tax liability from this year. Not only can this information help you set up your budget for next year, but it can also inform some strategic tax decisions, especially those related to your super.
Review your finances and take stock of all your taxable income streams, including:
- Wages from employment.
- Money earned from savings and investments.
- Benefits from the Government.
- Employer-provided benefits, including super contributions.
Also, check to see if you have reached the $25,000 pre-tax contribution cap for your super through salary sacrificing and employer contributions throughout the year.
This information will enable you to enact savvy financial strategies related to your super contributions.
Make sure to top up your super, and your spouse's, before EOFY.
What should you do with your super at EOFY?
Your employer has until EOFY to make all their required super contributions on your behalf. If you want to make individual contributions that will alter your tax liability for the financial year, you need to make those payments by 30 June, too. Remember, your super is a tax-advantaged retirement account. While these strategies mean you’ll have less access to your income now, saving early helps you accumulate slow and steady wins on the road to retirement.
Here are three super strategies to try out:
1. After-tax contributions
If, between the Superannuation Guarantee and your regular salary sacrificing, you won’t reach the $25,000 cap on pre-tax contributions for the year, you can make additional payments. Extra concessional contributions up to that cap can be deducted when you lodge your taxes.
Based on your financial assessment, you may want to speak to your employer about increasing salary sacrificing during the coming financial year.
2. Government super co-contributions
Low- and middle-income earners who make additional after-tax contributions to their super are eligible for tax-free co-contributions from the Government. If you want to receive co-contribution funds this year, make your after-tax payments before 30 June. We’ve created a handy guide to help you figure out how this scheme can work for you.
3. Spouse contributions
As long as it’s done before EOFY, making super contributions for your spouse can also entitle you to a tax offset when you lodge your next return. Help set the stage for the two of you to comfortably retire and find out if you’ll qualify for the offset.
Make your contributions count
Before EOFY, it’s important to review your finances and learn how additional super contributions can set you up for a lower tax burden and an easier retirement. Learn more about the tax implications of your super to save strategically throughout the coming year. Participating in higher salary sacrificing throughout the year can help you avoid the challenges and complexity that come from catching up with large concessional payments at EOFY.
If you’d like to make additional super contributions to your LGS account before EOFY, we’re here to help. Our offices remain closed, but you can access your unique BPAY details by logging into Member Online or calling us at 1300 LGSUPER (1300 547 873). If you are intending to make a large contribution to your super, it may be beneficial to get some financial advice first.
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