EOFY Important Actions & Tips

Reduce your tax exposure. Maximise opportunities. Reduce your risk of audit.

With the end of the financial year fast approaching, this update will help you with these end of financial year goals.

What’s new

1. Medicare levy low-income threshold

The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from 1 July 2025. This means that you will be able to earn more before having to pay the 2% Medicare Levy.

2. Superannuation Guarantee increases to 12%

The gradual increase in the Superannuation Guarantee (SG) rate will continue with a final increase to 12% on 1 July 2025. Talk with your employer about what this will mean to you.

3. Concessional superannuation contribution

The concessional contributions cap is the maximum amount of before-tax contributions you can contribute to your super each year without contributions being subject to extra tax. From 1 July 2025, the concessional contributions cap is $30,000 (as it was in the previous financial year).

4. HECS-HELP debts

The Australian Government has proposed several updates to the study and training loan system, including HECS-HELP, VET Student Loans, and the Australian Apprenticeship Support Loan. These measures are aimed at easing the financial pressure on borrowers and are subject to the passage of legislation, expected to be introduced in Parliament after 22 July 2025.

20% reduction
A 20% reduction in loan balances is planned to take effect on 1 July 2025. This reduction would apply to the loan balance on that date, prior to the application of indexation. For example, someone with a $50,000 debt may have their balance reduced by $10,000. This adjustment will be automatically applied by the ATO once the necessary legislation is in place. It’s important to note that voluntary repayments made before 1 July 2025 will not be eligible for a refund or credit under this reduction initiative.

Indexation
The government has changed student loan indexation calculations to use the lower of Consumer Price Index (CPI) or Wage Price Index (WPI). This change has been backdated to cover indexation applied from 1 June 2023. The adjustment reduced the 2023 indexation rate from 7.1% to 3.2%, and the 2024 rate from 4.7% to 4.0%. Borrowers affected by earlier rates have received loan balance adjustments or refunds visible in their ATO accounts.

Minimum income threshold
From 1 July 2025, the minimum income threshold for compulsory repayments will rise to $67,000 from $54,435. In addition, repayments will only apply to the portion of income above the threshold.

5. ATO interest charges

From 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) will no longer be tax-deductible. We encourage you to review your current tax position and discuss any exposure to GIC or SIC with us.

Areas of ATO scrutiny

1. Work-related deductions

The ATO has emphasised compliance priorities for the 2025 tax season and highlighted unusual rejected tax claims, including:
– Personal appliances and electronics deducted by a mechanic.
– Swimwear claimed by a truck driver for rest stops.
– Luxury clothing and accessories claimed by a fashion industry manager.

Taxpayers must ensure deductions are directly related to income-earning activities and supported by evidence such as receipts or invoices.

Our article last month, Tax Deductions Pub Test details this further.

2. Work from home expenses

There are two ways you can calculate deductions for expenses incurred by working from home – the fixed rate method and the actual cost method. Review our article, Working From Home Deduction for more detail.

Note, you cannot claim occupancy expenses such as rent, mortgage interest, property insurance, land tax or rates unless your home is a place of business. It is unusual for an employee’s home to be classified as a place of business.

3. Rental properties

With a recent ATO review indicating that 9 out of 10 rental property owners are making mistakes in their tax returns, rental property owners remain a key focus of the ATO this tax time. Key areas of concern include:

The difference between repairs & maintenance and capital improvements.

Repairs and maintenance costs can be claimed immediately if they relate directly to wear and tear from renting the property. Repairs and maintenance expenses generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. In contrast, capital improvements are claimed over time as a deduction under capital works at 2.5% of the construction cost for 40 years. Replacing an entire asset, such as a hot water system, is treated as a depreciating asset with deductions spread over specific periods.

Interest on loan expenses

Interest deductions for loans on rental properties can only cover the portion used for the property. Any part of the loan related to personal expenses or refinanced amounts for non-property purposes (such as school fees or holidays) must be excluded. The ATO monitors claims closely using financial institution data.

Co-owned property

Rental property income and expenses must be claimed based on the owner’s legal share. Joint tenant owner must claim 50%, while tenants in common claim according to their ownership percentage, regardless of who paid the expenses.

Timing

Expenses for a rental property can only be claimed for the periods that the property was genuinely available to rent. For example, if you have a short-term rental property but you choose to use it personally for 10 weeks over Christmas, you cannot claim expenses, including interest expenses, over this period.

Minimising the cost of end of year compliance

Having your paperwork organised always makes life much easier. Preparing your end of year documents and information prior to coming to see us will save you time and money. This is a general list of what to have ready when we next meet with you.

• Income Statement
• Interest income from banks and building societies
• Dividend statements for dividends received
  Tax statements of managed investment funds
• Rental property statements from real estate agent and details of other expenditure incurred
• For share sales or purchases, the purchase and sale contract notes and settlement sheets
• For real estate sales or purchases, the solicitor’s correspondence for the purchase and sale
• Any expenses related to your work you have not claimed from your employer
• Work from home diary
• Work-related car expenses details
• Self-education expenses
• Travel expenses
• Donations to charity
• Payments for income protection or sickness and accident insurance
• Health insurance and rebate entitlement
• Family Tax Benefits received
• Commonwealth assistance notices
• IAS statements or details of PAYG Instalments paid
• Details of any transactions involving cryptocurrency (e.g., Bitcoin)
• Details of any income derived from the sharing economy (e.g. Uber driving, rent from AirBNB, jobs completed through Airtasker etc.)
• Notice of intent to claim or vary personal super contribution