As the financial year draws to a close on June 30, Australians are being cautioned to be mindful of their spending in a bid to maximise tax deductions. According to Belinda Raso, Director of Tax Invest Accounting, not all purchases made to boost tax returns will qualify for immediate tax deduction as per the Australian Taxation Office (ATO) regulations.
Raso explained to Yahoo Finance that any depreciating assets acquired before June 30 that exceed $300 cannot be claimed in full for the current tax return. This includes items such as furniture, technical equipment, laptops, mobile phones, and hand tools. Instead of an immediate deduction, taxpayers must amortise the cost over the asset’s effective life, which typically lasts a minimum of two years.
At this time of year, retailers like Officeworks promote tax-deductible items heavily, but Raso warns that while these purchases may be deductible, the full amount is not recoverable in the current financial year. For instance, acquiring a $3,000 computer solely for work purposes on June 15 would only provide a $66 deduction for this financial year. Conversely, a similar purchase made on July 1 would allow taxpayers to claim a full year’s depreciation in the upcoming tax return—potentially resulting in a $750 deduction.
Recent research indicates that two in five Australians are planning to increase their expenditure on tax-deductible items compared to the previous year, with laptops, technology, stationery, and office furniture at the top of shopping lists. These items must be intended for work use to qualify for tax deductions.
Raso emphasised that while it is permissible to purchase high-value items now, potential buyers should recognise that they will not reap full tax benefits until later. Those with sufficient cash flow can proceed with their purchases, understanding that they won’t see the tax benefits in the current year.
Moreover, the ATO has introduced a depreciation tool accessible via myGov or through its website, which outlines the useful life of various assets. Generally, laptops and iPads are estimated to last two years, mobile phones also for two years, whereas desktop computers and most hand tools typically have a lifespan of four years.
Raso highlighted the importance of maintaining accurate records of depreciation schedules for ongoing tax returns until assets are fully expensed. If an accountant is replaced, it is crucial to provide a copy of past returns or self-lodged declarations to ensure continuity in claiming depreciation. Failure to do so could mean leaving money on the table when it comes to tax returns.
To summarise, as the financial year ends, taxpayers should be prudent with purchases aimed at claiming tax deductions. They must be aware of the ATO’s guidelines regarding depreciating assets and understand the implications of timing on their tax deductibility. Large purchases should involve careful consideration, particularly concerning their cash flow and the anticipated tax benefits in subsequent years.
