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Financial Advice

February 11, 2021
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In Financial Advice, Insurance, Latest Updates

Mind the insurance gap

At a time when many people have been focused on their family’s health and livelihood, having adequate life insurance has never been more important. Yet the gap between what we need and what we have has been growing.

Life insurance is all about ensuring your family can maintain their lifestyle if you were to die or become seriously ill. Even people who do have some level of protection might discover a significant shortfall if they had to depend on their current life insurance policies.

That’s because 70 per cent of Australians who have life insurance hold relatively low default levels of cover through superannuation.

Default cover may not be enough

The most common types of default life insurance cover in super are:

  • Life cover (also called death cover) which pays a lump sum or income stream to your dependents if you die or have a terminal illness.
  • Total and permanent disability (TPD) cover which pays you a benefit if you are disabled and unlikely to work again.

If you have basic default cover and are part of what is considered an “average” household with no children, then it’s likely you only have enough to meet about 65-70 per cent of your total needs. The figure is much lower for families with children. Indeed, a recent study by Rice Warner estimates that while current levels of insurance cover 92 per cent of death needs, they only account for a paltry 29 per cent of TPD needs.i

Such a shortfall means that you and/or your family would not be able to maintain your current lifestyle.

A fall in cover

The Rice Warner study found the amount people actually insured for death cover has fallen 17 per cent and 19 per cent for TPD in the two years from June 2018 to June 2020. This was driven by a drop in group insurance within super which has fallen 27 per cent for death cover and 29 per cent for TPD cover.

This was largely a result of the introduction of the Protecting Your Super legislation. If you are young or your super account is inactive then you may no longer have insurance cover automatically included in your super. You’ll now need to advise your fund should you require cover.

It may make sense not to have high levels of cover, or even insurance at all, when you are young with no dependents and few liabilities – no mortgage, no debt and maybe few commitments. But if you work in a high-risk occupation such as the mining or construction industries, or have dependents, then having no cover could prove costly.

Another reason for the fall in life insurance cover has been the advent of COVID-19. With many people looking for cost-cutting measures to help them through tough times, insurance is sometimes viewed as dispensable. But this could be false economy as this may be exactly the time when you need cover the most.

There is also the belief that life insurance is expensive which is certainly not the case should you ever need to make a claim.ii

An appropriate level of cover for you

It is estimated that an average 30-year-old needs $561,000 in death cover and $874,000 in TPD cover. As you and your family get older, your insurance needs diminish but they are still substantial. So a 50-year-old needs approximately $207,000 in death cover and $499,000 in TPD.

These figures are just for basic cover so may not meet your personal lifestyle. When working out an appropriate level of cover, you need to consider your mortgage, your utility bills, the children’s education, your daily living expenses, your car and your general lifestyle.

It’s also important to consider your stage of life. Clearly, the impact of lost income through death or incapacity is much greater when your mortgage is still high, your children are younger, and you haven’t had time to build up savings.

While having some life insurance may be better than nothing, having sufficient cover is the only way to fully protect your family. So why not call us to find out if your current life and TPD cover is enough for you and your family to continue to enjoy your standard of living come what may?

Now more than ever, in these uncertain times, you may find that you too are significantly underinsured and need to make changes. Are you ready to review your insurance needs? Reach out to the Sherlock Wealth team to discuss your unique situation here

i https://www.ricewarner.com/new-research-shows-a-larger-underinsurance-gap/
(All figures in this article are sourced from this Rice Warner report.)

ii https://www.acuitymag.com/finance/confusion-around-life-insurance-leaves-australians-vulnerable-nobleoak

 

December 2, 2020
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In Economy, Estate Planning, Financial Advice, Philanthropy, Tax

Taking philanthropy to the next level

Taking philanthropy to the next level

Australians are generous when it comes to opening their wallet for a good cause. But you may have reached a point in life where you want to make a more substantial contribution with control over how your money is spent. You may also wish to get your children involved to instil shared values.

While it hasn’t received much publicity, increasing numbers of Australians are using charitable trusts to give in a more planned and tax-effective way.

The turning point came in 2001 when the Howard Government introduced the Private Ancillary Fund (PAF) with the aim of encouraging more individual and corporate philanthropy. PAFs are charitable trusts that can be used by an individual or family for strategic long-term giving.

Since then, the number of PAFs and the amount of money contained in them has grown steadily. In early 2018, JB Were reported that there were 1600 PAFs, housing $10 billion and distributing $500 million a year.i

Claiming a tax benefit

According to Philanthropy Australia, in the 2015-2016 financial year 14.9 million Australians collectively donated $12.5 billion to charities and not-for-profits (NFPs).ii The median donation was $200 and 4.51 million taxpayers claimed for a ‘deductible gift’ on their tax return, highlighting that you don’t have to be wealthy to live generously.

Though donations to appropriately accredited charities and not-for-profits are tax-deductible, the figures indicate two-thirds of taxpayers don’t bother to claim. It’s well worth keeping track of receipts so you can claim when you think that, for example, a single donation of $5000 to a charity or NFP in a financial year will reduce your taxable income by $5000.

A core principle of tax-deductible philanthropy is that the giver shouldn’t stand to receive any material benefit. For example, if you buy tickets in a raffle run by a charity you can’t claim a tax deduction on the cost of the tickets. In order to receive a tax deduction for your donation, the recipient must also be registered as a deductible gift recipient (DGR).

There are many ways to be charitable but the impact on your tax bill will vary depending on how you go about it.

A more sophisticated approach

These days, people who want to take philanthropy to the next level with an ongoing, tax-effective approach have a variety of trusts to choose from.

The Private Ancillary Fund

PAFs are the best-known of the new breed of trusts. The money placed in a PAF is tax-deductible and assets in the fund aren’t subject to income or capital gains tax (but do qualify for franking credits).

Let’s say a dentist sets up a PAF and gifts half his $500,000 annual income into the fund where it’s invested in a diversified portfolio. The dentist’s taxable income now drops to $250,000. What’s more, no tax is paid on the returns made on the $250,000 that has been invested in the PAF. The dentist has to distribute a minimum of five per cent of their PAF’s net asset value annually, or a minimum of $11,000. After meeting that requirement, the dentist has a relatively free hand about which charities to support and how much they receive.

The Public Ancillary Fund (PuAF)

PuAFs work the same way as PAFs but operate on a larger scale. For example, 10 dentists may set up a PuAF to finance the building of dental hospitals in Africa. As well as gifting part of their incomes, the 10 dentists can (in fact, are obliged to) invite the general public to make tax-deductible donations to their PuAF.

Testamentary Trust (or Will Trust)

These are used by individuals wanting to leave money in their will to a specified charitable purpose. The two advantages of this type of trust are that the trustee(s) can distribute the income generated by the trust in a way that minimises the tax burden of beneficiaries, and the assets in the trust can’t be accessed by parties such as creditors and the divorcing partners of a beneficiary.

Smart selflessness

Like many parts of the economy, the charity sector has been ‘disrupted’ in recent years, with a stronger focus on donor engagement.

Organisations such as Effective Philanthropy and Effective Altruism have emerged to analyse how the charity dollar can be best spent. While crowdfunding platforms such as GoFundMe have emerged to facilitate, for example, the funding of individual medical procedures.

As a result, many philanthropists have gone from simply writing cheques to directing – or at least monitoring – how their money is spent.

Your contribution is most likely to be well spent if you donate it to an organisation that defines its mission clearly, has measurable goals, can demonstrate concrete achievements and is transparent about its finances (e.g. has annual reports available on its website).

Few people give to get a tax deduction but by supporting good causes in a tax-effective manner you can achieve a bigger bang for your philanthropic buck. If you would like to know more about tax-effective giving, give us a call.

Some examples of philanthropists making their mark
James &
Gretel Packer		 National Philanthropic Fund
(2014-)		 $200 million to the arts and Indigenous education by 2024
Paul Ramsay Paul Ramsay Foundation
(2014-)		 $3 billion to improve health and education outcomes for Australians
Andrew Forrest & his wife Nicola Minderoo Foundation
(2001-)		 $645 million to drive social change encompassing education, research and Indigenous affairs
‘Pokies King’ Len Ainsworth ‘Giving Pledge’
(2017-)		 $500 million to support primarily medical and health-related charities

 

Are you interested in creating a PAF to support your charity contributions, reach out to the Sherlock Wealth team to discuss your unique situation here

 

i https://www.strategicgrants.com.au/au/free-resources/blog/19-blog-kate/280-grantseeking-donor-giving

ii http://www.philanthropy.org.au/tools-resources/fast-facts-and-stats/

 

December 1, 2020
admin
In Financial Advice, Investments, Latest Updates, Money

How women can build their financial literacy

How women can build their financial literacy

Recent studies show that more than two in five Australians lack confidence when it comes to financial decision making.

The Federal Government believes this is largely due to a lack of financial literacy within the community, which is why it has developed the National Financial Literacy strategy. This initiative aims to motivate Australians of all ages, genders and socioeconomic backgrounds to engage more with their finances. In turn, this will help people make informed financial decisions that will improve their economic wellbeing.

What does it mean for women?

As social norms and family structures have changed, financial decision-making is no longer the sole domain of the male breadwinner – these days it’s just as important for women to take charge. Yet women experience higher levels of stress when it comes to managing money, with more than a third saying they find it overwhelming.

That’s why it’s vital for women to build their financial literacy. Becoming more financially savvy can change a woman’s life, by empowering her to be self-sufficient and make confident decisions that will improve her financial situation. Currently, only 10% of Australian women retire with enough savings to fund a comfortable lifestyle – so by arming women with strategies to help close the ‘super gap’ at each life stage, they may become less reliant on social services in retirement.

How you can take control

The financial decisions women make throughout their lives can impact their financial position in later years. With this in mind, here are some things you can do to take control at each stage of your life journey.

Starting out

Generally speaking, the gender pay gap puts women on the back foot as soon as they enter the workforce. Although there may be greater equality between the sexes than ever before, women’s average salaries are still 17.3% lower than those of men doing the same job.

This highlights how important it is for women to be able to budget if they want to build their savings and get ahead.

Raising a family

Women are still more likely than men to take time out of the workforce to raise kids, which means they receive less in employer super contributions during their careers. This leads to a significant super gap – men have an average super balance of $292,500 when they retire compared to $138,150 for women.

That’s why you need to prepare carefully for your career breaks, and top up your super either before or after to make up any shortfalls. The Government’s Parental Leave Calculator and Career Break Super Calculator make it easier to plan your finances around having a family. Visit https://www.moneysmart.gov.au/tools-and-resources to access these calculators.

Paying off debts

If you’re like most women, the largest debt you’ll ever have to pay off is your home loan. Before taking the plunge into homeownership, a Mortgage Calculator can show you how much you can afford to borrow, so you can work out a repayment plan that fits your budget. And if you’re prone to splurging on your credit card, a Credit Card Calculator could help stop your debts from spiralling out of control. Visit https://www.moneysmart.gov.au/tools-and-resources to access these calculators.

Investing for the future

With lower confidence levels and a smaller appetite for risk in their investments, women are less likely than men to choose high-growth investments like shares. This also means they miss out on potentially higher returns. But as women generally retire earlier and live longer than men, they can expect to spend more time in retirement – which makes it even more important for them to have enough money to last the distance. As the first step, make sure your investment mix matches your life stage. That way your super and other investments will have the best chance of growing over time.

Your financial adviser can help

Because women face so many distinct challenges, they need customised solutions – which is where a licensed financial adviser comes in. If there’s ever an aspect of your finances that you’re unclear about, reach out to the Sherlock Wealth team to discuss your unique situation here. We can explain it in a way that makes sense to you, so you can make wiser financial decisions.

Source: AMP News & Insights.

October 15, 2020
admin
In Financial Advice, Investments, Latest Updates

Advice clients are 5.2% a year better off

This article first appeared in the Financial Review and the IFA Magazine.

Advisers generate an average 5.2 per cent extra cash per year for clients regardless of market movements, through services such as asset allocation and behavioural coaching, new research has revealed.

Russell Investments’ Value of an Adviser Report sought to quantify the value delivered by advisers in five service areas beyond investment advice – asset allocation, correcting behavioural mistakes, adequately managing clients’ cash holdings, setting and monitoring goals and tax structuring.

The report found that advisers generated an average 2.2 per cent per year for clients through ensuring they bought and sold assets at the correct times in the market cycle, and 1.5 per cent through ensuring investments were made in tax efficient structures such as super and transition to retirement.

A further 0.9 per cent was generated through asset allocation basics such as selecting the correct investment option in the client’s super fund, and 0.6 per cent by diversifying a client’s cash and fixed income holdings.

Russell Investments head of wholesale partnerships Neil Rogan said the research highlighted the concrete difference advice could make even through relatively simple services such as acting as a sounding board for investment decisions.

“If you look at it, it’s around 3.1 per cent just through asset allocation and the adviser coaching the client on behaviours around when they should or shouldn’t sell,” Mr Rogan said.

“An important role that the adviser plays, not only is getting the allocation right but also really saving the client from themselves.

“When you look at the difference [in outcomes] over 20 years, I think that’s a really important point, and now more than ever that behavioural piece is important when advisers are working with clients, with these turbulent markets.”

Mr Rogan said being able to quantify the value of advice, which was often talked about in general terms in the industry, would help advisers to confidently articulate and charge fair up-front fees to clients.

“If you look at the fee piece, would you pay $3,000 to make $10,000? I think the answer to that is clearly yes – it’s a no-brainer, so why wouldn’t you get advice?” he said.

While the fifth non-investment service – setting and monitoring goals – was not specifically quantified in the report, Mr Rogan said this could often be the key piece of the puzzle when it came to delivering value for clients.

“It’s actually understanding what your client needs and wants to do, and putting in place strategies to help them do it,” he said.

“You can dress that up as goals-based advice, but it’s about the expertise and understanding the client’s behaviours and matching the asset allocation, investments and the tax strategies that fit around it.”

Source: IFA

 

October 12, 2020
admin
In Financial Advice, Insurance, Latest Updates

Life cover: More essential than ever

Life cover. More essential than ever

Living through COVID-19 has brought many challenges and shifting priorities as we deal with the financial impacts of the pandemic, and that includes the issue of life insurance. 

On the one hand, the pandemic has highlighted the importance of life cover. On the other, those who may have lost a job or lost income are questioning its necessity.

Many Australians continue to view life insurance as a discretionary item. This is in stark contrast to the car or home insurance which are seen as necessities. It seems we are willing to insure our property but not the thing that matters most – our life and our ability to earn an income.

Conflicting priorities

A survey by KPMG found that only 35 per cent of Australians thought life insurance was essential and just 30 per cent believed they needed income protection. But when it comes to car insurance, 79 per cent viewed cover as essential and yet, during COVID-19, car usage reduced as many were working from home and restricting their movements.

As the COVID-19 health crisis has reinforced our vulnerability in terms of health and the fragility of life, the need for life and income protection insurance has probably never been greater.

What would happen if you became too sick to return to work or if you passed away? Who would pay the mortgage, living costs, health insurance and utility bills for you or the family you left behind? For those with outstanding debt and dependants, life insurance will always be an important consideration.

It should also be remembered that the current health crisis does not rule out people getting sick with other illnesses, some linked to COVID-19 and some not. Mental health is one of these health issues and is becoming increasingly prevalent.

Claims on the rise

In the June quarter, the life insurance industry reported a net after-tax loss of $179 million on its individual income protection products, driven largely by claims for mental health issues in the wake of COVID-19.i Mental health claims are expected to grow even further as it is thought most people take more than a year to report such issues.

With claims on the uptick, this has meant the insurance industry is either looking to increase premiums or already has. This, in turn, may discourage people from keeping their cover.

Indeed, the KPMG survey said that 38 per cent of policyholders were looking to cancel their income protection insurance in the next 12 months, and 25 per cent were planning to drop life cover.

On the plus side, many Australians have some level of life and income protection insurance in their super. However, if you were to lose your job, then paying premiums on your insurance in super would come out of your fund balance, reducing your retirement savings over time.

Also, your insurance might well cease when you lose your job unless you opt to take out a private policy. You generally have 60 days to take up this option.

Redundancy payments

If your income protection insurance is outside super, then be mindful that not all policies include redundancy claims. And those that do may have restrictions. For instance, there is usually a waiting period of up to 28 days before any payments will be made.

If you are thinking of taking out a policy now to cover you in case of redundancy given the current economic environment, then you will probably have to go through a six-month no-claim period before you can benefit. During that six-month period, there must be no indication from your employer that redundancy may be on the cards.

Many insurance companies recognise the financial and personal difficulties many people currently face and some have offered to reduce or even suspend premiums without any loss of continuity to your policy.

One alternative may be to look at reducing the cover you have so that your premiums reduce. But it’s important to be mindful of your needs and ensure you have adequate cover.

The road ahead

The insurance industry, like many others, is being forced to look at a different way of doing business in a post-COVID-19 world, with simpler policies and flat premiums all being discussed.

In the meantime, making quick decisions on whether you still need insurance or your current level of insurance, may prove a mistake. If you are thinking about altering your cover, give us a call first to discuss your insurance needs.

i https://www.fsc.org.au/news/income-protection

October 11, 2020
admin
In Financial Advice, Financial Planning, Latest Updates

The Value of Financial Advice

Do the benefits really outweigh the costs?

The value of financial advice goes beyond dollars and cents – it can simplify your life and give you a sense of security and peace of mind about your current and future financial position.

A professional financial adviser can thoroughly consider your circumstances, and then develop strategies to help you reach your goals. These may include funding your children’s education, helping with tax planning, having enough money to live comfortably after retiring, insurance, estate planning and so on, all of which requires specific knowledge and experience.

You may seek financial advice to help you with a specific circumstance, such as starting a family, buying a house or managing an inheritance; a good planner can empower you to make the most of these situations.

These benefits are supported by recent US-based research. A 2013 study from US investment research giant Morningstar found that financial advice can help retirees boost their investment returns by 1.59% a year, reducing the risk of running out of cash.

This Research shows financial advice is not only good for your finances, it can make you happier and more confident too.

  • Research shows professional financial advice can help give you greater peace of mind.
  • Your financial adviser is there to help you reach all of your retirement lifestyle goals, not just look after your investments.
  • Professional advice can help you confidently navigate each stage of retirement while managing the complexities of constantly changing rules.

Researchers have also shown that people who receive professional financial advice feel happier, are more confident, less stressed and more in control.

That’s because financial advice is about much more than money. Your financial adviser is there to help you reach your goals at every stage of your life while taking care of all the things you may not have thought of — from the complexities of superannuation and Centrelink rules to tax planning and healthcare costs.

So if you haven’t spoken to your adviser lately it’s worth getting in touch with them to make sure you’re making the most of all the benefits that their professional financial advice can bring.

Australians have one of the highest life expectancies in the world, so we’re spending longer in retirement. Over time, our needs are likely to change dramatically.

Financial advisers can play a vital role in helping clients navigate each stage of retirement — from the active, early years spent travelling and pursuing hobbies, to the later, more sedate years with possible health and mobility challenges. By taking care of critical issues ahead of time and monitoring the situation on an ongoing basis, advisers help ensure their clients and their families are protected, whatever the future holds.

Because financial advice is all about creating a personalised plan designed for your individual needs, the cost of your advice will depend on your circumstances. However, your adviser is obliged to clearly outline all of the costs upfront, then get your written approval before going ahead, so you will know exactly what each service will cost ahead of time. Some of the fees you may be charged include a statement of advice fee, an implementation fee and ongoing advice fees.

So, if you’re weighing up the costs and benefits when it comes to securing your financial future — and your peace of mind — meeting with an adviser could be one of the best investments you ever make. 

Why not schedule a meeting with a Financial Adviser today?

Reach out to the Sherlock Wealth team to discuss your unique situation here.

Disclaimer

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should read the Product Disclosure Statement (PDS) before making a decision about a product.

September 1, 2020
admin
In Estate Planning, Financial Advice, Superannuation

Who inherits your super?

Who inherits your super

There are only certain people who can inherit your super when you die. There are also two different types of nominations you can make. Here’s what you need to know before making your super beneficiary nomination.

Super is different from other assets, such as your house, because the trustee of your super fund ultimately decides who gets your super and any associated life insurance, if it’s held within the super fund when you die.

Super doesn’t automatically go to your estate, so it’s not automatically included in your Will. That’s why you need to tell your super fund who you nominate. And, depending on the type of nomination, they’ll either consider your nomination or be bound to pay it as you’ve nominated. 

Who can you nominate?

Super fund trustees can only pay your super to ‘eligible dependants’ or to the ‘legal personal representative’(LPR) of your estate.

Eligible dependents are restricted to these people: 

Spouse

A spouse includes a legally married spouse or a de-facto spouse, both same-sex and opposite-sex.

A spouse can be a person you’re legally married to but are now estranged or separated from. So, if you haven’t formally ended a marriage, your husband or wife is still considered your dependant under super law. And, while you can’t be legally married to two people, it’s still possible to have two spouses – a legally married spouse and a de facto spouse. 

Child

A child includes an adopted child or a stepchild. Even though a stepchild is included in the definition of a child, if you end the relationship with the natural parent or the natural parent dies, the child is no longer considered your stepchild. However, they may still be considered a financial dependant or in an interdependency relationship with you and could therefore continue to be a beneficiary of your super. 

Financial dependant

Generally, a person who is fully or partially financially dependant on you can be nominated as your super beneficiary. This is as long as the level of support you provide them is ‘necessary and relied upon’, so that if they didn’t receive it, they would be severely disadvantaged rather than merely being unable to afford a higher standard of living. 

Interdependency relationship

Two people have an interdependency relationship if they live together and have a close personal relationship. One, or each of them, must also provide a level of financial support to the other and at least one or each of them needs to provide domestic and personal care to the other.

Two people may still have an interdependency relationship if they do not live together but have a close personal relationship. For example, if they’re separated due to disability or illness or due to a temporary absence, such as overseas employment.

Who is not a dependant?

A person is not a dependant if they are your parents, siblings or other friends and relatives who don’t live with you and who are not financially dependent on you or in an interdependency relationship with you. If you do not have a dependant you should elect for your super to be paid to your legal personal representative and prepare a Will which outlines your wishes. 

Legal personal representative

A legal personal representative (LPR) is the person responsible for ensuring that various tasks are carried out on your behalf when you die. You can nominate an LPR by naming the person as the executor of your Will. Your Will should outline the proportions and the people you wish your estate, including your super, to go to. 

Types of nominations

There are two types of nominations you can make once you decide which super dependants, or LPR, you wish to nominate: 

  1. Non-binding death benefit nomination

A non-binding death nomination is an expression of your wishes and the trustee will consider who you’ve nominated but they’ll ultimately make the final decision about who receives your super and any associated life insurance. 

  1. Binding death benefit nomination

A binding nomination means the trustee is bound by your nomination. They must pay your super benefits to your nominated dependants in the proportions you set out or pay it to your estate if you nominated an LPR. Binding nominations need to be signed and witnessed by two witnesses who are not named as beneficiaries. Also, they expire after three years unless you re-affirm your nomination.

If you’re not sure of the best way to nominate your super beneficiaries, or to discuss your situation in further detail, please contact the Sherlock Wealth team here.

Source: IOOF

August 24, 2020
admin
In Financial Advice, Financial Planning, Tax

Paying taxes and maximising tax deductions

Paying taxes and maximising tax deductions

Tax planning can feel stressful at the best of times. However, when it’s tax time, paying close attention to allowable deductions may lower the tax you need to pay on your tax return. Here are some allowable deductions you may wish to consider when preparing your next return.

While every person’s financial circumstances are unique, it can be helpful to be aware of some of the different deductions that may apply when you are next doing your tax planning.

Tax agent costs

Hiring a registered tax agent to lodge your tax return is a great way of organising your finances, however, sometimes it can be expensive. The good news is that you may be able to deduct any fee you incur for your agent to prepare or lodge your tax return in the next financial year.

Charitable contributions

When you next make a donation, check if the organisation is a deductible gift recipient (DGR) and the amount is over $2. If so, then you may be able to claim any donations you have made as a tax deduction. To qualify, the donations must have been made with nothing received or expected to be received in return and be recorded with a receipt.

Insurance premiums for income protection

Generally, premiums paid by Australian resident individuals for income protection insurance under a policy they own may be claimed as a tax deduction to the extent that the premiums are paid for benefits that are designed to replace the individual’s lost income. If you claim on your income protection policy, any income replacement benefits received are generally assessable as income and liable for income tax just like your regular income.

Education and training

If you are completing any courses that relate to your current job, lead to formal qualifications, improve your skills or knowledge and are likely to lead to increased income, then these course fees may be deductible. Any other costs associated with undertaking the course may also be deductible such as textbooks, student service fees and travel between home or work and the place of education.

COVID-19 Working From Home

With many people’s working arrangements changing due to COVID-19, the ATO has created a shortcut method to help calculate deductions when working from home. You can claim your working from home expenses for the period between 1 March 2020 to 30 June 2020 in the 2019-20 income year and 1 July 2020 to 30 September 2020 in the 2020-21 income year if certain conditions are met. The deduction which can be claimed is 80 cents for every hour you worked in the 1 March – 30 June 2020 period and applies to electricity expenses, cleaning expenses, internet costs and computer consumables.

Miscellaneous items

Certain job-specific purchases can be valid tax deductions. For example, if your job requires you to spend time outside on a daily basis then you may be able to claim a deduction for sunscreen costs. You may be able to claim a deduction for a handbag or satchel you buy to carry items for work purposes such as laptops, tablets or work papers. The amount of the deduction depends on the extent you use the bag for work purposes. You can find out more information on the ATO website.

Your life is unique and so are your personal finances which is why your tax planning is so important. There is no one-size-fits-all approach, so you should take into consideration your individual circumstances when preparing and lodging your tax return and seek expert advice.

Speak with Sherlock Wealth for help with information on tax planning and preparation to help plan for your financial goals and future. If you’re looking for guidance with financial planning, get in touch here.

NOTE: All information refers to Australian resident individual taxpayers and has been informed by the Australian Tax Office website.

Information was correct at the time of writing (July 2020) but may be subject to change.

Information provided in respect of taxation law is given in good faith and for the general information purposes of Australian tax residents only. It is believed to be accurate as at July 2020 but may be subject to change. As the application of tax law depends on each person’s individual circumstances, you should always seek advice from a qualified tax professional.

 

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