Are you approaching retirement?

Then chances are the funding of your lifestyle in retirement may be on your mind.

Take steps now to avoid getting caught short on retirement income and live the retirement lifestyle you want.

The qualifying age is increasing by six months every two years until it reaches 67 in July 2023. The Age Pension age increased to 66 and a half on 1 July 2021.

If for example, you are planning to retire at 60 you will need to wait until you’re 67 before you can apply for the Age Pension. You’ll have to rely on your own savings and super in the interim, making it crucial to ensure you have enough money put away for later years. But the good news is that there’s still time to grow your retirement savings.

Boost your super

Contributing more to your super can be a reliable route to bolstering your retirement fund. By making extra contributions through salary sacrifice, you can grow your super and at the same time reduce the amount of income tax you pay. The government will tax your salary sacrificed contributions, within the allowable concessional contribution cap, at 15 per cent, which may be much lower than your marginal tax rate.

Making non-concessional or after-tax super contributions is another option. Generally, you can contribute up to $110,000 each financial year if your total super balance is less than $1.7 million at 30 June of the last financial year. To understand how these contributions work, it’s wise to get professional advice.

Beef up your savings

Your personal savings outside of super can supplement your super payments in retirement. But are they growing enough now to provide you with some level of income when you retire?

To build up your savings, you may have to invest part of it and make sure it’s growing faster than the rate of inflation over the long term. You should seek professional advice to see what investments are appropriate for you.

Know your entitlements

Besides the Age Pension, you may be eligible for other government benefits and concessions. For example, you may be eligible for a concession card such as the Pensioner Concession Card (if you are receiving the Age Pension), Commonwealth Seniors Health Card or the state-based Seniors Card. Concession cards like these may entitle you to discounts on some commercial and public services. Concessions that allow you to buy prescription medicine at a discount may also be available.

But keep in mind that these benefits have strict eligibility rules. There’s also no guarantee that these entitlements will still be available by the time you retire. So, take charge of your retirement.

Working with your financial adviser, you can develop a strategy that helps ensure you’ll be well provided for regardless of changes to pension policies.

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.

Four priorities for the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

record-keeping
work-related expenses
rental property income and deductions, and
capital gains from crypto assets, property and shares.

These ATO’s priority areas ensure that there is an appropriate level of scrutiny on the correct reporting of deductions and income.

Taxpayers can take steps to lodge right the first time

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where they see people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules,” Mr Loh said.

You must have spent the money yourself and weren’t reimbursed
If the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income
You must have a record to prove it.

Record-keeping

With some weeks left until 30 June, start organising the income and deductions records you’ve kept throughout the year. This will guarantee a smoother tax time and ensure you claim the deductions you are entitled to.

For anyone who deliberately tries to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Lodge right, no worries

We often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income.

Available pre-fill information and readiness to lodge can be easily checked in the ATO app this tax time.

NB: While the ATO receives and matches a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, they don’t pre-fill all of that information for you.

Work-related expenses

Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year.

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” said Mr Loh.

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring mum and dad.

You can easily keep track of your expenses with myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” Mr Loh said.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Mr Loh said.

CONTACT ALLAN HALL

Tag: tax planning

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