Review any salary packaging arrangements (eg for motor vehicles) to ensure they were entered into before the services have been performed by employees or before salary review time, so that they will be effective.
With the concessional superannuation contributions cap set to $25,000 for everyone, it's important to ensure that salary sacrifice agreements are reviewed so there are no excess concessional contributions in 2019.
Individuals may consider delaying the exchange of contracts to sell an appreciating capital asset until after 30 June 2019. That way, the capital gain will only be assessable in the 2020 income tax year.
If a capital gain has already been made this year, it may be possible to crystallise capital losses (eg by selling shares that have declined in value) to reduce the capital gain. However, when adopting this strategy, taxpayers must take care to ensure they are not engaging in "wash sales", where shares are sold shortly before 30 June solely to realise the capital loss and then bought back shortly after 30 June.
A capital gain realised in 2019 will be eligible for the 50% CGT general discount to the gross gain if the asset was held for at least 12 months before it was sold (ie before the CGT event occurred). However, this discount is not available to non-resident individuals.
Although a myriad of tax law considerations are involved when claiming work-related expenses, there are three main rules:
- Only claim a deduction for money actually spent (and not reimbursed).
- The work-related expense must directly relate to the earning of income.
- An employee must have a record to prove the expense.
For example, a claim for work-related expenses will not be allowed if deductions are claimed for private expenses (eg travel from home to work and not required to transport bulky equipment), reimbursed expenses (eg an employee is reimbursed for the cost of meals, accommodation and travel) or if no records are kept.
Other practical issues to consider when claiming work-relates expenses include the following:
- When claiming work-related expenses relating to a vehicle, travel, internet, self-education or a mobile phone, taxpayers should ensure that the amount claimed for these expenses is reasonable and verifiable. The ATO is using real-time data to compare deductions claimed by taxpayers in similar occupations and income brackets, so it can identify higher-than-expected or unusual claims.
- When claiming deductions up to $300 (allowable without a receipt), taxpayers must still be able to substantiate the deductions claimed if they are questioned by the ATO.
- When claiming deductions for work uniforms, taxpayers should ensure they only claim for uniforms that are unique and distinctive (eg with the employer's logo and specific to the taxpayer's occupation) and not clothing for everyday use (eg plain suits worn by office workers).
Taxpayers working from home may be able to deduct a pro rata portion of water and electricity costs as well as depreciation for office equipment, provided they keep a diary of the hours worked at home to substantiate their claims.
An individual may claim the amount incurred on self-education expenses as a tax deduction, provided the expenses were incurred to maintain or improve the individual's skill or knowledge necessary to perform the individual's current job (as opposed to securing a new job). For example, an accountant attending an accounting seminar, conference or workshop to stay up to date with the latest accounting developments could claim the expenses as a deduction.
Money that individuals earn from "gig" jobs through platforms like Uber, Airtasker and Airbnb, such as transporting passengers or renting out a room or house, counts as assessable income. This means it must be declared on the individual's tax return. Depending on the activities and expenses, tax deductions may also be available in relation to this type of income, but it's important to substantiate any such claims.
Donations of $2 or more to deductible gift recipients are tax deductible. Donations of property to such recipients may also be tax deductible. However, donations to overseas charities may not be tax deductible.
An investment property is negatively geared if the rental income is less than interest and other costs of maintaining the property. In such a case, the loss on the investment property can be offset against other income to reduce taxable income.
Because individuals on higher tax rates will gain a greater tax benefit from the loss deduction compared to individuals on lower tax rates, a possible strategy (provided CGT consequences and other circumstances have been considered as well) with married couples is to have the negatively geared property in the name of the spouse who earns the highest income. Of course, the benefit of this strategy reverses when the property yields a net income. Therefore, investment properties that are positively geared (ie when rental income exceeds the costs associated with the investment property) may be held in the name of the spouse with the lower taxable income. This also applies for interest-bearing deposits such as term deposits.
A measure that is in only its second year of operation, and therefore should not be forgotten, is that from 1 July 2017, taxpayers can no longer claim travel expenses related to inspecting, maintaining or collecting rent for a residential rental property, unless they are an excluded entity.
Rental property deductions are a red flag area for the ATO and it has warned that it will double the number of audits scrutinising such deductions this year. The ATO says that a random sample of returns with rental deductions found that 90% contained an error.
The ATO expects to more than double the number of in-depth audits this year, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing.
If an income-producing asset such as an investment property is damaged or destroyed, the taxpayer will need to work out the correct tax treatment of insurance payouts they receive and their costs in rebuilding, repairing or replacing the assets.
Both employees and self-employed individuals can claim a tax deduction annually to a maximum of $25,000 for personal superannuation contributions, provided the superannuation fund has physically received the contribution by 30 June and the individual has provided their superannuation fund with a "notice of intention to claim" document.
Taxpayers must be aware of exactly how long a superannuation contribution takes to reach a superannuation fund – for example, if a superannuation contribution is made one day before 30 June, but the payment is received in the superannuation fund's bank account two days later (ie after 30 June), no tax deduction will be allowed in the 2019 income tax year.
An easy way to prevent any late payment issues is to pay superannuation contributions at the beginning of June each year.
New rules mean "inactive" superannuation accounts (those that have received no contributions or rollovers for 16 months) will lose their insurance coverage from 1 July 2019 – unless the fund member wants to keep their insurance and takes action now.
This year's Productivity Commission inquiry into superannuation highlighted concerns that many Australians' super benefits are being eroded by fees and inappropriate insurance premiums. The government has now passed laws to force superannuation funds to take action – in some cases by cancelling insurance policies or paying benefits over to the ATO for consolidation.
The new laws broadly take effect from 1 July 2019 and apply to MySuper and choice products (eg retail and industry fund accounts), but don't apply to SMSF trustees or small APRA funds.
The new laws ban superannuation funds from charging exit fees when a member wants to leave the fund, making it easier for members to close and consolidate their super accounts. For member account balances below $6,000, funds are also prohibited from charging annual administration and investment fees totalling more than 3% of the member's account balance.
Currently, many funds offer insurance on a default "opt-out" basis. Under the new laws, funds may not provide insurance for members of accounts that have been "inactive" (ie have not received any contributions or rollovers) for at least 16 months, unless specifically directed by the member. This means many existing insurance policies will be cancelled from 1 July 2019.
Funds are supposed to contact affected members, but everyone should check the following:
- Do I have an "inactive" account? This commonly includes workers with one or more old accounts from a previous job, parents taking time out of the workforce to care for children and even SMSF members who also keep an old public offer account open just for the insurance coverage.
- What insurance am I signed up to? How much am I paying annually in premiums, and what is the insured amount? Do I hold multiple policies for the same insurance?
- Do I want to keep the insurance cover? Your needs are unique and depend on your own financial and personal circumstances. If in doubt, seek professional advice.
If a member wishes to keep the insurance policy, they must make an election in writing before 1 July 2019.
Consolidating inactive low-balance accounts
Inactive accounts with balances below $6,000 will be paid over to the ATO, which will then consolidate the individual's super into a single account. Even if a low-balance account has not received any contributions or rollovers for 16 months, the account will not be deemed "inactive" if the fund member has taken actions such as changing investment options or changing insurance coverage. Individuals can also elect not to be treated as an inactive account member by writing to the ATO.