Don't Miss Out! Maximising Savings Before Rebate Changes Hit in 2025
Crikey, tax time is just around the corner again! It feels like only yesterday we were wrestling with receipts and trying to decipher the ATO’s website. But this year, it's even more important to get organised and maximise your potential savings, because significant changes are on the horizon that could impact your tax return in 2024-2025 and beyond.
Before we dive in, if you're thinking about investing in solar power and battery storage to reduce your electricity bills and potentially increase your tax deductions, be sure to read our Complete Guide for the latest information.
The Clock is Ticking: Key Changes Coming in 2024-2025
The Australian Taxation Office (ATO) has recently updated its guidelines, and several changes that took effect from 1 July 2024 could significantly impact your tax return. Getting your head around these now will put you in a prime position to make informed decisions before they fully bite. Let's break down the most important updates:
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Work From Home Expenses: The temporary shortcut method is gone, GONE, GONE! For the 2024-25 financial year, the fixed rate method is the standard. This allows you to claim 70 cents per hour for eligible working-from-home expenses. Make sure you keep accurate records of your working hours to justify your claims.
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Car Expenses: If you use your car for work-related purposes (outside of commuting), the cents per kilometre rate is now 88 cents per kilometre. Remember to keep a detailed logbook or other acceptable records to substantiate your claims. The ATO is eagle-eyed when it comes to car expense claims.
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Electric Vehicle Home Charging (PHEVs and EVs): This is a big one for those making the switch to electric vehicles! From 1 July 2024, if you own a Plug-in Hybrid Electric Vehicle (PHEV) you can use the EV home charging rate to calculate the cost of charging your PHEV at home. The rate is 4.2 cents per kilometre.
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Important Considerations for PHEVs: To use this rate, you must be able to accurately determine the home charging percentage. If your vehicle doesn't provide this data, and you choose to use the 4.2c rate, you cannot claim commercial charging station costs as a separate deduction. Alternatively, you can track and claim the actual cost of electricity used for charging.
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Zero Emissions EVs: Owners of pure EVs can continue using the 4.2 cents per kilometre rate, provided they meet the relevant requirements. This does not apply to electric motorcycles or electric scooters. Consult Practical Compliance Guideline PCG 2024/1 for full details.
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Medicare Levy Exemption for Lump Sum Payments: If you receive a Lump Sum Payment in Arrears (LSPIA) and meet the eligibility requirements, the ATO will exclude this amount when calculating your Medicare levy liability. This means you won't pay Medicare levy on the eligible lump sum.
Actionable Tips to Maximise Your Savings Now
So, what can you do to make the most of the current tax rules before these changes fully come into effect?
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Review your working-from-home setup: Ensure you have a dedicated workspace if you plan on claiming deductions related to work-from-home expenses. Document everything! Keep receipts for office supplies, equipment, and any other eligible expenses.
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Maintain a detailed car logbook: If you use your car for work purposes, start keeping a detailed logbook now. This is crucial for claiming car expenses using the cents per kilometre method. Include the date, purpose of the trip, and the kilometres travelled.
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Assess your EV charging habits: If you own an EV or PHEV, track your charging costs and kilometre usage carefully. Decide whether the 4.2 cents per kilometre rate or claiming the actual cost is more beneficial for your individual circumstances.
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Gather all your income statements and relevant documents: This includes your PAYG summaries, bank statements, investment income statements, and any other documents related to your income and expenses.
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Stay informed: The ATO website is your best friend. Regularly check for updates and changes to tax rules.
Accessing Secure Services and Staying Up-to-Date
The ATO makes it easier than ever to manage your tax affairs online. You can access secure services to view your details and lodge your tax return online. Before you complete your tax return for 2024–25, take the time to explore what's new and any changes that may affect you, this blog post was last updated 26 November 2024.
Final Thoughts
Tax time can be daunting, but with a little planning and preparation, you can maximise your savings and avoid any nasty surprises. By understanding the upcoming changes and taking action now, you’ll be in a much better position to lodge your tax return with confidence. Good luck, and happy tax season!
