Money & Banking
The major changes Aussies need to know about starting July 1
The end of the financial year is fast approaching and many of us cannot wait. However, there are a number of changes coming once July 1 hits for Australians to be aware of.
If there is anything you should be doing before Monday comes around, it’s sorting out your finances. Here’s an extensive list to help:
Income tax relief on standby
To stimulate spending and boost the economy, the coalition is under pressure to give a tax break to lower and middle-income earners of up to $1080 for single earners, or for dual income families up to $2160 as of July 1 (after lodging their tax return).
When the tax cuts pass, around 1500 Queensland businesses will be granted a tax relief with the state government – raising the payroll threshold from $1.1 million to $1.3 million.
The tax cuts are a part of a three-stage $158 billion plan and the final stage is expected to be contested by the opposition when parliament comes back on July 2.
The Australian Tax Office has confirmed, however, that they will provide cuts if the laws are passed after June 30.
Penalty and minimum wage increase
The minimum wage will increase by 3 per cent to $740.80 per week ($19.49 an hour) starting on or after July 1.
What work expenses you should look out for
- Claims for work-related clothing, dry cleaning and laundry expenses will be flagged by the ATO and they will check taxpayers who take advantage of the exemption from keeping receipts for people who spend less than $150 per financial year on laundry expenses.
- Overtime meal claims.
- Union fees and subscriptions.
- The ATO will be keeping an eye out for mobile phone and internet costs where people who claim the whole (or a large amount) of the bill for their personal mobile as work-related.
- The ATO is concerned taxpayers are automatically claiming the 5000km motor vehicle journey claim regardless of the actual amount spent travelling
- Unless you are actually running a business from home, deductions made for home office use, including “occupational” costs like rent, rates and mortgage interest, are not allowed and will be looked out for.
- Taxpayers who incorrectly claim deductions under the rule they are allowed to incur work-related expenses of $300 or less in total without receipts will also be on the radar. The ATO is concerned some taxpayers are claiming this deduction without actually incurring any expenses.
Look out for dodgy property deductions
The ATO has announced it will be looking out for excessive interest expense claims, including when property owners attempt to claim borrowing costs on the family home as their rental property.
Those who also incorrectly allocate rental income and expenses between owners will also be paid close attention to. An example of this includes when a jointly owned property is claimed by the owner with the higher taxable income rather than jointly.
Holiday homes that are not actually listed for rent are also on the ATO’s radar. It is noted rental property owners should ONLY claim for the periods the property is actually for rent or is actually available for rent.
A close eye will also be kept on incorrect claims for newly purchased rental homes. The costs to repair defects and damages exist purely at the time of purchase. The costs of renovation cannot be claimed immediately and are deductible over a number of years not instantly.
Inactive accounts could go straight to the Tax Office
Those with superannuation accounts face the risk of their finances being transferred to the Australian Taxation Office if no contributions have been made for 16 months, or if they have a balance of less than $6,000.
If the ATO does get hold of your super finances, they will attempt to combine the super into the account you are currently using (if you have one).
If they are unable to find one, the ATO will hold it until it can be claimed.
Your insurance claims (including past) could be lost
From life insurance to disability and protection cover – dormant accounts that could be beneficial to an individual may be lost.
Some may not be aware they have a default life insurance included in their superannuation 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 insurance turned off.
This could not just impact life insurance, it may impact disability cover or income protection cover.
Exit fees to be banned
Superannuation fund exit fees will be banned from July 1 – so if you are thinking about switching your funds to a new super, it will save you quite a bit of money.
Exit fees come to about $52 million each year and can now thankfully be changed and sorted around without the worry of exit fees.
If individuals have a small amount in their super (less than $6000), fees will be capped at 3 per cent to try to prevent the cost from eroded.