Posted June 23, 2020
This post is general information only and does not constitute professional financial advice. For advice specific to your business, please consult a licensed financial planner or accountant.
With the end of financial year approaching, HABA have a few last-minute reminders of areas in which you can claim tax deductions before the end of financial year (EOFY).
This year more than ever, with the COVID-19 stimulus, market volatility and business downturns, salon owners absolutely MUST have a look at where they are standing now and see if you can take advantage of some of the end of year strategies available. Not every individual or business has been impacted in the same way. For some, there is less concern about tax minimisation and more about cash flow optimisation. For others, the environment has meant more work and more income.
“It is now more important than ever that everyone understands how to best prepare and lodge their tax returns, to ensure they claim their applicable deductions,” says the ATO. “This tax time the ATO expects to see a substantial increase in people claiming deductions for working from home or for protective items required for work.”
We encourage all our members to consider speaking to their accountant or financial planner this tax time as this year IS different than most. Using an expert will ensure that you get your maximum deductions and can get more cash back in your pocket and back into your salon.
Here’s some key areas to be thinking about this tax time:
Working from home expenses
This year, thanks to COVID-19, claiming deductions for anyone working from home will be easier than ever. For the period of 1 March and 30 June 2020, taxpayers will be able to claim 80 cents per work hour for all their additional running expenses, rather than needing to calculate costs for specific running expenses. This is designed to make tax returns simpler for anybody who has recently transitioned to working from home due to COVID-19, and ensures they are able to easily claim their relevant deductions.
Single touch payroll
Just about all employers will have processed payroll for their employees using Single Touch Payroll this year. It means that all employees will get an end-of-year income statement from ATO online services through your myGov account and you won’t have to create payment summaries for all your staff – this is HUGE load off the shoulders of salon owners.
Instant Asset Write off Increases
The government announced that they would increase the instant asset write off scheme due to the COVID pandemic. The threshold amount for each asset (including equipment around your salon and large machines) is increased to $150,000 up from $30,000. All salon owners will be eligible for this write-off, if your equipment falls within the guidelines. Speak to your accountant for more details.
As part of the various stimulus packages made available by the government, there are some significant changes to superannuation this tax time. Salon owners can make a personal, deductable super contribution of up to $25,000 for the 2019/2020 income year. Make sure that you count ALL Super contributions made in the year when calculating this cap. If you didn’t take advantage of the full amount of the concessional contributions limits last year, you can carry the unused balance forward to this year and get a tax deduction for the amount this year. Any contributions to superannuation must be made before 30 June 2020.
Clothing + protective equipment
If you’ve had to purchase additional equipment for yourself or your team due to COVID-19, these expenses can be claimed. Think items like gloves, facemasks, anti-bacterial spray or hand sanitiser.
From 1 July 2019, if you had a superannuation account that is inactive you will need to “opt-in” with your life insurance and TPD providers to retain your current policies. Now is a good time to check the cover you want to retain in super accounts which you don’t contribute to, and contact the fund to opt-in.
PLUS All your normal deductions:
- Travel expenses
- Buying, hiring, mending or cleaning uniforms
- mobile phone calls
- your HABA membership
- technical or professional publications
- Car use (check with your accountant on this one)
- Self-education expenses
- Tools and equipment
While it might feel like we have been living our COVID Life for years, remember that there were 9 months of the financial year BEFORE Covid, so go back and check your receipts and make sure you claim EVERYTHING you’re entitled to this financial year.
Take this list to your accountant and ask them to talk you through all the points we have mentioned. Don’t be afraid to ask your accountant to check for all the deductions your applicable for, but make sure you bring all your paperwork with you to make sure you claim the maximum deduction this tax time.
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