2024 Tax Planning Strategies
Reviewing and optimising your tax situation is essential as the end of the financial year approaches 30 June 2024. Effective tax planning can enhance your financial outcomes by reducing tax liability and strengthening your investment portfolio. Here’s a comprehensive guide of various tax planning strategies that could benefit you.
Superannuation Contributions
Superannuation is a powerful tax planning tool that can significantly impact your financial situation. Here are the key areas to focus on:
Contribution Caps: The 2023–24 income year limits are $27,500 for tax-deductible contributions and $110,000 for voluntary non-deductible contributions.
Deductible Contributions: If you’re under 75, consider maximising your tax-deductible contributions, especially if you are in a higher tax bracket.
Catch-up Contributions: If you have less than $500,000 in super, you can claim a tax deduction higher than the cap. However, a specific limit will apply based on the amount of deductible super contributions that have gone into your account since 1 July 2018.
Non-Concessional Contributions: Consider utilising the "bring-forward" rule if you are under 75 and your super balance is below the general transfer balance cap, now increased to $1.9 million from 1 July 2023.
Downsizer Contributions: From January 2023, the age requirement for downsizer contributions has been reduced to 55, allowing a one-off contribution of up to $300,000 from the proceeds of selling your home.
Spouse Contributions: You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria and your super fund allows it. This is particularly beneficial if your spouse's income is below $37,000 this tax year. You may benefit from making a spousal contribution of up to $3,000 to their superannuation before 30 June 2024 to qualify for a tax offset.
Additionally, a lower-income earner who contributes $1,000 non-concessional to their superannuation by 30 June 2024 could be eligible for a Government Co-Contribution of up to $500.
Contributions must be received in the superannuation fund’s bank account by 30 June 2024 to ensure they count towards the current year's caps. To mitigate any risk of delays, plan to make contributions by Thursday, 20 June 2024. Please check with your superannuation fund to confirm specific cutoff times.
Income Protection Insurance
Premiums for income protection insurance are tax-deductible. If possible, prepay your annual premium before 30 June to claim a deduction for the current financial year.
Gifts and Donations
Donations of $2 or more to deductible gift recipients are tax-deductible. Ensure you obtain and keep receipts for all donations so you can claim them accurately. If you and your spouse are in different marginal tax brackets, consider making additional deductions for the spouse at the higher tax rate. Donations to overseas charities may not be tax deductible.
Prepayment of Work Related and Investment Expenses
Considering the upcoming lower personal tax rates starting from 1 July 2024, it might be beneficial to prepay deductible interest and review other potential deductible expenses before 30 June 2024. This could involve donating to charity or covering work-related expenses like self-education, memberships, and subscriptions.
Similarly, for investment-related activities, you can prepay expenses before 30 June 2024, such as up to 12 months of interest on property or share investments, to optimise tax advantages for the current financial year.
Depreciation Schedule for your investment property
If you own an investment property, obtaining a property depreciation report prepared by a Quantity Surveyor allows you to claim deductions for depreciation and capital works on the property and its assets. The initial cost of this report is often offset by substantial tax savings in the first year of property ownership. Note deductions for properties acquired after 1 July 2017 may have restrictions. Additionally, the expenses related to obtaining a quantity surveyor's report are tax-deductible.
Private Health Insurance
The Medicare levy surcharge (MLS) is payable if an individual has a taxable income of $90,000 or a family taxable income of $180,000 and does not have private patient hospital cover. The MLS rate, which can range from 1% to 1.5%, is calculated based on your taxable income, reportable fringe benefits, and any family trust distribution tax paid. A specific income definition (income for MLS purposes) determines MLS liability and rate, which differs from your taxable income. By taking out appropriate health insurance coverage, you can avoid the surcharge.
SALARY PACKAGING AN ELECTRIC VEHICLE
Since 1 July 2022, new electric vehicles under the luxury car limit are exempt from fringe benefits tax. This means an electric vehicle under $89,332 can be salary packaged for a substantial tax benefit.
Electric Car home charging rate
If you own or lease an electric car used for work and use the logbook method to calculate deductible running costs, it can be challenging to work out the cost of electricity used to charge the vehicle at home. Under the new guideline, if an employer provides an employee or an associate with an EV, which results in car, residual, or expense payment benefits, they may opt to use the simplified rate of 4.20 cents per kilometre to determine the taxable value of these benefits. This same shortcut method can be utilised for individual taxpayers to calculate work-related car expenses for income tax purposes, particularly when using the logbook method.
The guidelines do not apply to plug-in hybrid vehicles with an internal combustion engine.
As we approach the end of the financial year, implementing these strategies can help you maximise your tax benefits and set yourself up for the next year. If you have any questions or need personalised advice, please don't hesitate to get in touch with our office. Taking proactive steps now can result in significant benefits in the future.
WARNING
The information in this article is general in nature. It does not consider your specific needs or circumstances, so you should consider your financial position, objectives, and requirements and seek financial advice before making any financial decisions.