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ATO tax return claim: All the changes coming July 1 | What you need to know

From looming tax concessions to a superannuation overhaul, as well as changes to the minimum wage, child care subsidies and even luxury car taxes, news.com.au has broken it down into a one simple, if not long, list to help you understand before July 1 falls on Monday.

INCOME TAX RELIEF ON STANDBY

The Coalition took an income tax break to the election and is under pressure to push the relief through parliament to stimulate spending and boost the economy.

When passed, lower and middle-income earners will get a tax break of up to $1080 for single earners or up to $2160 for dual income families as early as July 1 — after lodging a tax return.

The tax cuts include a three-stage $158 billion plan, with the final stage expected to be contested by the Opposition when parliament resumes on July 2.

The Australian Tax Office, however, says it will retrospectively provide cuts if the laws are passed after June 30.

LIFT IN INSTANT ASSET WRITE-OFF TO $30,000

The next few days is the perfect time to buy a new car for the business or lash out on that walk-in freezer to take advantage of a lift in the Government’s asset write-off for small businesses.

Earlier this year, that instant asset write-off jumped from $25,000 to $30,000, but a new survey says a quarter of business owners have no idea the initiative has been bolstered.

The study conducted by Officeworks and H&R Block reveals 84 per cent of Australian owners won’t take advantage of the instant cash write-off at all this year, as the tax expert at accountancy firm Mark Chapman shares his tips to give the books a boost before June 30.

He says the increased write-off expense was a great way to start.

“As we get towards the end of the financial year, now is a good time to do some last-minute planning,” Mr Chapman told news.com.au.

The initiative will allow businesses to purchase items costing up to $30,000 each and get an immediate tax reduction when July 1 ticks over in a couple of weeks.

“It’s a really good time for a cash flow perspective to take advantage of that,” he said.

“It’s a real win for small businesses because if you’re buying tax-deductible office equipment, computers, laptops, tools, or even motor vehicles and utes, you write off the cost completely against your tax.”

INACTIVE SUPER ACCOUNTS TO CLOSE JULY 1

Australians could be left stranded without life insurance on July 1 when a little-known but significant change to superannuation is enforced.

Most are unaware their superannuation has a default life insurance included in the fund. And from the first day of the new financial year, super accounts that have been inactive for 16 months will have their default life cover switched off.

More than 50 per cent of Aussies have no idea these changes are coming, while a staggering one in four have no idea if they even have life insurance attached to their super, according to data from the Association of Superannuation Funds of Australia (ASFA).

Many Aussies have multiple superannuation funds because they opt for the default fund whenever they start a new job.

So, most will still have access to default life insurance via their current, active super fund, but Aussies are being urged to check the status and conditions of their fund.

“This legislation has been introduced for very good reasons,” ASFA chief executive Martin Fahy said.

“However, the time frame for implementation has meant it has been challenging for superannuation funds to engage their members to ensure they understand the consequences of the changes in just a few short months.”

HOW SUPER CHANGES WILL IMPACT YOUNG WORKERS

When the super changes come into effect from July 1, default life insurance attached to super funds will close unless the members decide to opt in.

Shine Lawyers superannuation law expert Will Barsby says it takes years for young Australians and tradies to exceed the $6000 balance.

“The idea behind these changes was to stop those smaller balances being eaten away by fees but unfortunately what it will also do is open up a new group of people to the risk of being under insured,” he told news.com.au.

“Not having decent insurance cover can have life changing impacts if you have injured yourself and can no longer work.

“In our law firm we help many tradies injured in workplace accidents access their insurance and unfortunately many are junior staff or apprentices who might hurt themselves simply through inexperience.

“If you have income protection insurance for example then you can have 75 per cent of your wage paid to you while you recover.”

AND WHAT ABOUT THOSE ON MATERNITY LEAVE?

“Workers on maternity leave or paternity leave are often not making contributions into their super funds so under these changes if it is longer than 16 months since the last payment into their account then their insurance will be cancelled,” Mr Barsby said.

“We know many women will take extended maternity leave of two years or more or sometimes won’t return to the workforce until their children are much older.

“This will catch many parents out. We are facing a situation where people will go to bed on 30 June and be covered and wake up on 1 July to no longer be covered.”

STUDENT LOAN CHANGES

University graduates will begin repaying their student debt earlier from July 1 when the HELP repayment threshold is lowered to $45,881 from $51,957. Those who fall into the minimum repayment threshold will have to pay back their debt at a rate of 1 per cent a year. Comparison site Compare The Market says a second year assisting nurse/midwife in NSW could earn as little as $46,274 annually, that’s $462 a year in student loan repayments.

OTHER SUPER CHANGES

• Low balanced accounts with less than $6000 will have fees capped at 3 per cent to avoid whole accounts being gouged by fees

• All super fund exit fees will be banned

• Those who have retired and aged between 65 and 74 can make voluntary super contributions if they no longer meet work test requirements and their super balance is under $300,000

PENALTY RATES AND MINIMUM WAGE

The minimum wage will be increased by 3 per cent to $740.80 per week or $19.49 an hour for the first full pay period starting on or after July 1.

LUXURY CAR OWNERS TAX

Cars valued at $100,000 and $150,000 will be charged a duty of $14 per $200 of market value in Victoria.

For cars worth more than $150,000 a duty of $18 per $200 of market value will be charged.

Low-emission cars and farming vehicles will be exempt from these charges.

PAYROLL TAX RELIEF

About 1500 businesses in Queensland will get a tax relief with the state government raising the payroll threshold from $1.1 million to $1.3 million.

CHILD CARE SUBSIDY RATES

Changes on July 1 for Child Care Subsidy income thresholds include:

• Up to $68,163 — 85 per cent

• More than $68,163 to under $173,163 — down to 50 per cent

• $173,163 to $252,453 — 50 per cent

• $252,453 to $342,453 — down to 20 per cent

• $342,453 to $352,453 — 20 per cent

• $352,453 equal or above — 0 per cent

FAMILY TAX BENEFIT CHANGES

The higher income free area for the Family Tax Benefit Part A will increase from $94,316 to $98,988 from July 1. The benefit will reduce by 30 per cent for every dollar families earn over $98,988.

MOST COMMON MISTAKES AT TAX TIME

H&R Block tax expert Mark Chapman told news.com.au the most common mistakes people made with tax claims was a failure to keep organised records.

This can limit how much people can claim because they’ve lost the receipts or can’t prove a purchase.

“Make sure you’re not forgetting to claim things that you actually could claim for, things like working from home expenses,” he said.

“If you spend time on weekends and in the evenings working from home, things like that are often forgotten by people who could have made a claim.”

This will allow you to claim a portion of your home bills such as electricity, internet, mobile and any depreciation on equipment like computers and printers.

“It’s surprising these days how many people use their own personal mobile phone for work use, so their work doesn’t supply a phone but they are expected to be on call 24-hours-a-day,” Mr Chapman said.

“That can very quickly add up that kind of thing.”

WORK EXPENSES TO WATCH*

• Claims for work-related clothing, dry cleaning and laundry expenses. The ATO has flagged it will be checking taxpayers who take advantage of the exemption from keeping receipts for people who spend less than $150 on laundry expenses. The ATO believes too many people are claiming this without actually incurring the expense.

• Deductions for home office use, including claiming for “occupation” costs like rent, rates and mortgage interest, which are not allowable unless you’re actually running a business from home.

• Overtime meal claims

• Union fees and subscriptions

• Mobile phone and internet costs, with a particular focus on people who are claiming the whole (or a substantial part) of the bill for their personal mobile as work related.

• Motor vehicle claims where taxpayers take advantage of the 68-cent-per-kilometre flat rate available for journeys up to 5000km. The ATO is concerned too many taxpayers are automatically claiming the 5000km limit regardless of the actual amount of travel.

• Incorrectly claiming deductions under the rule that allows taxpayers who have incurred work-related expenses of $300 or less in total to make a claim without receipts. The ATO believes some taxpayers are claiming this — or an amount just under $300 — without actually incurring the expenses at all.

DODGY PROPERTY DEDUCTIONS*

• The ATO has announced it will be paying close attention to excessive interest expense claims, such as where property owners have tried to claim borrowing costs on the family home as well as their rental property.

• It will also be looking at the incorrect apportionment of rental income and expenses between owners, such as where deductions on a jointly owned property are claimed by the owner with the higher taxable income rather than jointly.

• It will be looking at holiday homes that are not genuinely available for rent. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. This is particularly important for holiday homes where the ATO regularly finds evidence of homeowners claiming deductions for their holiday pad on the grounds it is being rented out when in reality the only people using it are the owners or their family and friends, often rent-free.

• It will be keeping a close eye on incorrect claims for newly purchased rental properties. The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible instead over a number of years. Expect to see the ATO checking such claims and pushing back against claims that don’t stack up.

SHARING ECONOMY SHAKE-UP*

• The ATO will also be looking closely at those working in the shared economy to ensure income and expenses are correctly reported.

• Examples include transporting passengers for a fare (Uber), renting out parking spaces, providing skilled services such as web or trade services (Airtasker), supplying equipment or tools, completing odd jobs, errands or deliveries, or renting out equipment such as tools, musical instruments or sports equipment.

• Renting out a room or house for accommodation is a big one. Airbnb hosts are the obvious example. The ATO is believed to be particularly concerned about taxpayers claiming the full CGT main residence exemption when part of their main residence has been rented out through Airbnb — the law prevents a full CGT exemption where part of a main residence has been used to earn income.

* Source: H&R Block