Tax Planning for Individuals 2021

As the end of the financial year approaches, it is important that you take the time to focus on tax planning and tax issues that affect you before 30 June 2021 arrives.

We have outlined some of the key tax considerations below:

Prepaid Expenses

Expenses are deductible when they are incurred.  For an individual this is when the expenses are paid, therefore wherever possible pay for deductible expenses prior to 30 June.  This includes insurance and interest on rental properties.

Income Protection Insurance

A deduction is available for the cost of insurance to cover loss of income.

Superannuation Contributions

From 1 July 2021, contribution cap changes are changing:

1 July 2017 to
30 June 2021
From 1 July 2021
Concessional Contribution$25,000 per annum$27,500 per annum
Non-Concessional Contribution$100,000 per annum$110,000 per annum

The ability for a member to contribute is dependent on their age and Total Superannuation Balance (TSB) at the previous 30 June. Total Superannuation Balance will be measured at $1,700,000 from 1 July 2021. For more information about the changes to contributions, read our blogs on super cap increases and changes to the transfer balance cap.

Eligibility for Super Co-Contribution

You will be eligible for the government super co-contribution (max. of $500 in 2020-21) if you made personal super contributions to your superannuation account during the financial year (max. $1,000), your total income is less than $54,837 and 10% comes from employment related activities or carrying on a business and you were less than 71 years old at the end of the financial year.

Home Office

If you use a home office for ‘income producing activities’ you may be able to claim a proportion of some expenses as a tax deduction (e.g. telephone, electricity, gas).  To be able to claim the deduction, you must keep entries for a representative period (minimum 4 weeks) to indicate the hours you spend in the home office.

A deduction is also available for work related telephone calls.  You can substantiate deductions by:

    • Identification from an itemised telephone account; or
    • Diary entries for a minimum of a 4 week period, (together with telephone accounts).

Motor Vehicle

If you use your motor vehicle for work related purposes the following two methods can be used to calculate your deduction:

    • Cents per kilometre
      • A set rate for each business kilometre
      • Claim to a maximum of 5,000 business kms
    • Log book method
      • Based on the business use percentage as per the log book records
      • Odometer readings are required at the start and the end of the period
      • Written evidence of expenses is required

Of late, the ATO has allocated their resources to audit investigations, particularly on substantiation records and logbooks. Ensure your logbook is up to date.

Personal Income Tax Rates

Current marginal tax rates are shown below:

Taxable income up to $18,2000% Rate
Taxable income from $18,201 to $45,00019.0% Rate
Taxable income from $45,001 to $120,00032.5% Rate
Taxable income from $120,001 to $180,00037.0% Rate
Taxable income over $180,00145.0% Rate

These rates do not include the Medicare Levy (currently at 2%).

Low Income Tax Offset

From 1 July 2020, the government has brought forward stage 2 of the personal income tax plan. This means the low income tax offset has increased from $445 to:

Taxable incomeTax offset
Up to $37,500$700
$37,501 to $45,000$700 less 5c for each $ above $37,500
$45,001 to $66,667$325 less 1.5c for every $ above $45,000

Low and Middle Income Tax Offset

The low and middle income tax offset is available to the following individual taxable income threshold:

Taxable IncomeTax Offset
Up to $37,000$255
$37,001 to $48,000$255 plus 7.5c for each $ over $37,000
$48,001 to $90,000$1,080
$90,001 to $126,000$1080 less 3c for each $ over $90,000

HELP, SSL, ABSTUDY SSL, TSL and SFSS Repayment Threshold

The repayment threshold for the 2020-21 financial year is $46,620. Once an individual’s taxable income is above this threshold, a repayment of the debt is payable on the lodgement of the individual’s tax return.

Travel Expenses

A deduction can be claimed for the expenses incurred in travelling for work related business purposes.  If you did not receive a travel allowance:

    • and travel is less than six nights in a row:
      • written evidence is required; and travel diary not required.
    • and travel more than six nights in a row:
      • written evidence is required; and travel diary is required

Medicare Levy – low income thresholds

The Medicare levy low income threshold is $22,801 for individuals, $38,474 for families (with no children) and $36,056 for seniors and pensioners for the 2020-2021 income year. 

Private Health Insurance

From 1 April 2020, the rebate levels applicable are:

 StandardTier 1Tier 2Tier 3
Singles≤ $90,000$90,001-105,000$105,001-140,000≥ $140,001
Families≤ $180,000$180,001-210,000$210,001-280,000≥ $280,001

Rebate for premium paid 01/07/2020 – 31/03/2021

StandardTier 1Tier 2Tier 3
< Age 6525.059%16.706%8.352%0%
Age 65-6929.236%20.883%12.529%0%
Age 70+33.413%25.059%16.706%0%

Rebate for premium paid 1/4/2021 – 30/06/2021

StandardTier 1Tier 2Tier 3
< Age 6524.608%16.405%8.202%0%
Age 65-6928.710%20.507%12.303%0%
Age 70+32.812%24.608%16.405%0%

Medicare Levy Surcharge

StandardTier 1Tier 2Tier 3
All ages0.00%1.00%1.25%1.50%

Depreciation

If you purchase assets to be used for a number of years you can claim a decline in value each year.  ‘Depreciator’ is a business that specialises in the preparation of depreciation schedules for rental properties and can be used to:

    • Obtain a Quantity Surveyor’s report on any rental property Australia wide; or
    • Obtain a report listing depreciation entitlements for that property on a yearly basis.

Therefore, if you have recently purchased a rental property, please contact us to discuss the preparation of a depreciation schedule.

Substantiation

To claim your personal tax deductions, ensure you are able to substantiate your expenses:

    • Claims exceeding $300 must be supported by written evidence for the entire amount, not just the amount over $300.
    • $300 limit does not include award transport payments or car, meal or travel allowance expenses.
    • For expenses $10 or less, provided in total they do not exceed $200, a written note detailing the same information as on a receipt (in a diary for example) is sufficient where you cannot obtain a receipt.

If you have questions or need any assistance, please do not hesitate to contact us on 9886 0800 or via email.

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).