June 2021 : What changes on 1 July 2021?
Work from home expenses under scrutiny & the perils of browsing Facebook
If you worked from home during lockdown and spent money on work related items that were not reimbursed by your business, you might be able to claim some of these expenses as a deduction – but not everything you purchase can be claimed.
The ATO has stated that it is looking very closely at work related deductions that are being claimed. If you are claiming your expenses, there are three methods you can use:
- An 80 cents per hour short-cut method (you will need to have evidence of hours worked like a timesheet or diary)
- The 52 cents per hour method (which excludes phone, internet, or the decline in value of equipment which are all claimed separately), or
- The actual expenses method.
The ATO has highlighted four ineligible expenses that are being claimed:
- Personal expenses such as coffee, tea and toilet paper
- Expenses related to a child’s education, such as online learning courses or laptops
- Claiming large expenses up-front (instead of claiming depreciation for assets), and
- Occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates, that cannot generally be claimed by employees working from home.
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Am I taxed on an insurance payout?
Australia has had its fair share of disasters over the last few years – drought, bushfires and floods – that have ramped up the volume of insurance claims. Most people would assume that if and when they need to claim on their insurance, the insurance payout covers the damage and is not income assessed for tax purposes - but this is not always the case.
Insurance payouts for damaged or destroyed personal items are generally not taxed. For example, any insurance payout you receive for your family home won’t necessarily be taxed. But, the rules are different if you have used your home to produce an income, for example, you have used part of your home as a home business or you have rented out part of your home.
The rules are also different if the item is a personal asset costing more than $10,000 or if the asset is a collectible that cost more than $500. Where the insurance proceeds exceed the original cost of the asset, that is, the asset appreciated in value, then capital gains tax might apply.
And, if the asset damaged is related to a business or an income producing asset like a rental property, the rules are also different.
If you have been impacted by a disaster and are uncertain of how any insurance proceeds will be taxed, please talk to us and we can work with you to help you understand your position.
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What changes on 1 July 2021?
Super guarantee rate increase to 10%
On 1 July 2021, the Superannuation Guarantee (SG) rate will rise from 9.5% to 10% - the first rise since 2014. It will then steadily increase each year until it reaches 12% on 1 July 2025.
The 0.5% increase does not mean that everyone gets an automatic pay increase, this will depend on your employment agreement. If your employment agreement states you are paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then your take home pay might be reduced by 0.5%. That is, a greater percentage of your total remuneration will be directed to your superannuation fund. For those paid a rate plus superannuation, then your take home pay will remain the same, but your superannuation fund will benefit from the increase. If you are used to annual increases, the 0.5% increase might simply be absorbed into your remuneration review.
New stapled superannuation employer obligations for new staff
From 1 July 2021, where an employee does not identify a fund, legislation before Parliament will require the employer to link the employee to an existing superannuation fund. That is, an employee’s superannuation fund will become ‘stapled’ to them. An employer will not simply be able to set up a default fund, but instead will be required to request that the ATO identify the employee’s stapled fund. If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer’s default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).
Concessional and non-concessional contribution caps
From 1 July 2021, the superannuation contribution caps will increase enabling you to contribute more to your superannuation fund (assuming you have not already reached your transfer balance cap).
The concessional contribution cap will increase from $25,000 to $27,500. Concessional contributions are contributions made into your super fund before tax such as superannuation guarantee or salary packaging.
The non-concessional cap will increase from $100,000 to $110,000. Non-concessional contributions are after tax contributions made into your super fund.
Transfer balance cap – why you will have a personal cap
The transfer balance cap (TBC), as the name suggests, limits how much money you can transfer into a tax-free retirement account. From 1 July 2021, the general TBC will increase from $1.6m to $1.7m but not everyone will benefit from the increase.
From 1 July 2021, there will not be a single cap that applies to everyone. Instead, every individual will have their own personal TBC of between $1.6 and $1.7 million, depending on their circumstances.
| My super is… | TBC to 30 June 2021 | TBC from 1 July 2021 |
|---|---|---|
| In accumulation phase | $1.6m | $1.7m |
| In retirement phase and I reached the $1.6m cap limit between 1 July 2017 and 30 June 2021 | $1.6m | $1.6m |
| In retirement phase and I have never reached the $1.6m cap limit at any time between 1 July 2017 and 30 June 2021 | $1.6m | $1.6m plus indexation on the amount between your highest ever balance and the $1.6m cap. |
Single touch payroll reporting
Single touch payroll will apply to most businesses from 1 July 2021, this will include small businesses (those with 19 or fewer staff) and businesses with closely held employees (e.g., directors of family companies, salary and wages for family employees of businesses). No further extensions will be granted.
For employers with closely held employees, there are some concessions on how reporting is managed with the option to report one of three ways: reporting actual payments in real time, reporting actual payments quarterly or reporting a reasonable estimate quarterly. These concessions allow a level of flexibility in relation to determining and making payments to closely-held payees. However, if your business is impacted, it will be important to plan throughout the year to prevent problems occurring at year end.
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If you would like to discuss this further, please contact our Tax Manager, Briana Kim.
Briana Kim | 07 3367 0663
* Disclaimer: This newsletter is of a general nature and for general information only. Do not act on this information before getting specific advice. Other factors or individual circumstances may influence the result.