The end of the financial year (EOFY) is fast approaching. If you are one of the more than 14 million individual Australians who need to submit a tax return this year, now is the time to consider what you need to do to be ready for 30 June.

1. Understand if you need to lodge a tax return

Depending on your level or source of income for the year, you may not need to lodge a tax return. For example, if you receive Government payments and allowances, and your taxable income has not exceeded $20,542 or tax was not withheld from your payment, you won’t need to lodge a tax return.

If you are in doubt, the Australian Tax Office (ATO) recommends you use the ‘Do I need to lodge a tax return’ tool on the ATO website. If you don’t need to lodge a return, you can complete a non-lodgement advice online.

2. Get your paperwork ready

If you do need to lodge a return, it always pays to be prepared. Collect all income and expense documentation in advance of 30 June to support your lodgement. Also understand what expenses you are able to claim that relate to any income earned or capital gains or losses crystallised within the financial year you are lodging for.

It is good practice to keep this documentation in one place and often easier to save or file it as you go. Many receipts can be scanned and stored in phone apps for easy compilation and access.

3. Consider changes to your personal circumstances

Circumstances change each year, sometimes marginally and sometimes significantly. For example, have you had a significant windfall, been bequeathed funds, need to pay child support, are accessing benefits or are you about to retire? These circumstances can potentially all substantially impact your tax position.

Sometimes your change in circumstances can be less dramatic. For example, were you one of the many people who had to work from home during the year due to COVID-19 lockdowns? If so, did you know the ATO introduced the ‘shortcut method’ to allow people to claim work-from-home related expenses incurred between 1 March 2020 and 30 June 2021, at a rate of 80 cents for every hour worked?

This is an easy way to calculate expenses as it requires only minimal record keeping but may not be appropriate if your actual expenses are larger, in which case you will need to support your claim with the appropriate records.

Each year it is prudent to consider what action might be required to ensure you have accounted for changes to your situation.

4. Consider your current year capital gains and losses

Each financial year is a snapshot in time meaning when investment income is earned, or when capital gains or losses are realised, there are potential tax implications. It is therefore important to keep track of your investment activity throughout the year so you can decide whether or not to realise capital gains or losses before 30 June.

By keeping records and being armed with the full picture of your investment situation, you are in a position to decide whether or not to bring forward the sale of particular investments to realise a capital gain or loss in the current financial year (to offset existing losses or gains), or to hold off a sale to fall in the subsequent financial year. This can have a substantial impact on your tax position at the end of the year.

5. Consider your super position

Some changes to superannuation announced in the 2021 Federal Budget will come in to effect from 1 July 2021. It’s important to be aware of how these changes might impact you. As of 1 July 2021:

concessional (pre-tax) contributions cap will increase from $25,000 to $27,500 with the tax rate to remain at 15 per cent;

non-concessional (post-tax) contributions will increase from $100,000 to $110,000 per year; and

the transfer balance cap will increase from $1.6 million to $1.7 million, if transferred in to retirement pension on or after 1 July 2021.

Some existing superannuation contribution opportunities to investigate before 30 June that may impact your tax position are spouse or self-employed contributions, concessional contributions made under the carry-forward rules and the government super co-contribution.

The options mentioned may provide tax deductions or offsets but are governed by complex rules and contributions caps so consultation with an accountant or superannuation specialist to determine eligibility is advised.

Summary

Each individual taxpayer is responsible for their own return. To avoid making mistakes it is imperative that you understand what you can and cannot do. If you complete and submit your own tax return, the ATO website is a good starting point for the information you may need. Otherwise a qualified accountant can help ensure your tax return is submitted correctly!

Either way it’s important to be prepared. That means considering your personal situation and what’s changed around you, gathering your paperwork, tracking your portfolio, and making the appropriate investment decisions to ensure you meet all your obligations.