What should I do at the end of my financial year?
With the end of the 2020 financial year approaching, here are a few things you might want to consider from our mortgage broker Sydney team. They might not make you rich, but hey wealth-creation is about baby steps…
- For those of you who have worked from home recently, you can claim a tax deduction for doing so. The ATO offers a special COVID-19 flat rate of 80 cents an hour, without the need for receipts (just a record of hours worked). If there were two of you working from home, you can both claim this.
But beware it might be worth seeing if you can claim more by the time you add up phone/ internet/ office furniture/ tablets and bills. Just try not to claim any of the interest you pay on your home loan or your Council Rates notice, which you might be able to do, but this introduces CGT issues that will probably bite you one day.
- It’s too late for you to pre-pay your investment interest for the next 12 months, but consider it in a years’ time if a Capital Gain Tax event takes place, or if in FY2022 you might retire, be made redundant or have a baby.
- On the last day of the year, maybe print out your internet banking snapshot, showing the balances of your investment & business loans. Otherwise, when your accountant is finalising your tax down the track you might be asked to manually search for what the balances were on June 30.
- Concessional Contributions can be made into Super from your pre-tax dollars. For PAYG this must be done via Salary Sacrifice so if you haven’t been doing it, consider it from July onwards. For the self-employed, you still have a bit of time to do so (it can take a few days to process so don’t leave it till June 28!).
Tina and I concessionally contribute $25K each year. Even though these contributions get taxed at 15% on the way in, the whole amount is immediately tax-deductible. This saves us $15,000 in tax every year (45% less 15%).
- For the self-employed, have a chat about your business structure when you visit your accountant. It’s often beneficial to trade from a family trust or to have a family trust as a shareholder of your Pty Ltd. When will your children turn 15 and 9 months? Do you have any self-funded retiree parents?
- The Instant Asset Write-off allows you to claim the full cost of a business asset and for a short time the threshold is $150K (rather than $30K).
So if your business income flows to individuals on the 45% tax bracket, the cost of a coffee machine might be: $2,000 less GST (x 10/11) = $1,818.18 – 45% = $1,000. Time to go shopping! Remember this only applies to removable assets. If you repair the roof of your commercial building, that’s a repair (immediate deduction). If you replace the roof, that’s not removable and no, not an instant write-off, so you instead would claim the depreciation over many years.
- On a personal note, if you have any new years’ resolutions, I always reckon June 30 is a better day to give up or reduce the bad stuff, rather than the party summers night of December 31st
- It’s always a good time to get advice around your home loan structure. Most of our clients have at least 3 loans against their PPOR:
Loan A Fixed: no offset (from 2.09%) Loan B Variable: attached to a transactional offset, linked to their credit card Loan C Equity facility: attached to a non-transactional offset account. Those who first engage us – our mortgage broker Sydney team- normally have Loans B & C mixed up, so they have a stack in the offset against their home loan. That’s fine if you’re never going to use it. Westpac, ANZ and CBA are all paying thousands for you to switch to them, which might come in handy if you need to pay a break fee to get out of your current fixed rate – and generally makes paying the break fee worth doing.
Guys, I love everything to do with financial planning, mortgage structures, property & wealth creation so don’t be afraid to run anything by me. If your friends have never used a broker please let them know that they don’t know what they don’t know and to give it a crack. The banks pay us to do their work, rather than paying employees, meaning that our specialist services are completely free. I spent 15 years as a bank manager and I didn’t know half of what I now know. In fact, at the age of 50, I now cringe at what kind of financial advisor I was just 5 years ago. Perhaps that’s the trick to life? Don’t be a know-it-all. Keep learning, every day.
I really do try to keep these emails short but I think they get longer every time. Far out.
Have an awesome weekend, Jason
Jason C. Khoury, JP, Financial Strategist, iChoice Managing Partner