As this financial year draws to a close, we offer a few suggestions to minimise your tax bill and maybe get off to a good start for next financial year.
We recommend keeping tax related receipts in one location. It is also a good idea to provide us with a summary of your receipts when it comes to preparing your tax return. You may wish to use our various tax summary templates and resources.
The Australian Taxation Office app is one that may be helpful for more simple income tax returns. The “myDeductions” feature is able to store records, and at the end of the year it can be imported directly into our tax software.
There are other apps available, ranging from free to a small fee for apps that will allow you to store and organise documents, but this can also be achieved by a camera and file storage system.
Previously, a discount of 10% was available for those who made up-front payments towards their HELP debts. This was removed from 1 January 2017.
Salary packaging can be a great way to reduce your taxable income and pay less tax. The end of the financial year is an opportune time to review your salary packaging opportunities. There are still worthwhile advantages to be gained from salary packaging, but it is a complex area. We can provide advice to help you save.
Salary sacrificing for small personal devices such as a mobile phone or tablet provided it is used more than 50% of the time for work related purposes can be extremely tax-effective.
If you are considering making tax deductible donations in the coming months, you may wish to bring forward the donation to before 30 June to claim a tax deduction in your 2017 income tax return.
You can use a marginal tax rate calculator to help you approximate your tax position, and then make a tax deductible donation. It is important to note that supporting crowdfunding campaigns are not tax deductible. If you would like to make a tax deductible donation, you can always check on the ABN lookup portal.
Motor vehicle log books
It may be a good idea to keep a log book should you be claiming motor vehicle deductions. Doing so may be the best means of maximising your motor vehicle deductions if you have not done so in the last five years. A log book must be maintained for a continuous 12 week period and is valid for five income tax returns. If you start a log book prior to 30 June 2017 it will be valid for your 2017 income tax return.
If you are purchasing a new car, you may wish to do a logbook. You can decide to not claim a motor vehicle deduction by the log book method, but you can’t backdate it if you didn’t do it within the 2017 financial year.
Prepaying expenses before year end can be a way of reducing your current year tax liability. It can be particularly beneficial if you expect to be on a higher tax bracket this year compared with next year.
If prepaying interest, make sure you contact your financial institution and arrange the prepayment treatment. Otherwise the payment could be treated as a reduction in the principal of the loan, which is not tax deductible.
Taking advantage of super
Concessional contributions: Concessional contributions can be thought of as "before tax" contributions. They are generally tax deductible to either you or your employer.
Concessional contributions are generally taxed at a concessional rate of 15%. The amount of concessional contributions that can be made in the 2017 financial year is capped at $30,000. However, if you are 50 at 30 June 2017 the cap is $35,000 for the 2017 financial year. If you are considering making a superannuation contribution prior to 30 June 2017 we recommend contacting us to ensure the best tax outcome.
Division 293 tax: Note that individuals who have an income combined with their superannuation contributions that exceeds $300,000 should be aware that they will be required to pay an additional 15% tax, called Division 293 Tax. This tax is levied on superannuation contributions that exceed the $300,000 threshold.
Please note from 1 July 2017 the Division 293 tax threshold will reduce from $300,000 to $250,000.
Non-concessional contributions: Non-concessional contributions are your after-tax contributions. Non-concessional contributions can be useful in moving your personal wealth into a superannuation fund which has a 15% tax rate.
If you are considering a substantial contribution to superannuation we suggest that you discuss this with us to ensure that the contribution meets the current requirements.
Government co-contributions: Is your income less than $51,000? Consider making an after-tax payment into your superannuation fund. In the 2017 year, the Government will contribute 50c for every dollar you contribute to your superannuation, up to a maximum of $500. The maximum co-contribution is received when total assessable income is below $36,021 and phases out when income rises to $51,021 per annum.
Budget 2017 – There were some significant changes that have come in to play this last year, and there are some planning opportunities. Please refer to our Super Reforms article for more information.
Private health insurance
If you expect your income(s) to exceed the Medicare Levy Surcharge (MLS) threshold, it may be worthwhile to consider obtaining private health insurance. The cost of obtaining private health insurance may be lower than paying the MLS. We can discuss the relevant thresholds with you.
You may want to consider the appropriate level of wealth insurance cover you have. Do you hold income protection insurance, life insurance or TPD insurance? These insurances may already be paid via your superannuation fund. If not, we are able to assist by having our referral partner give you a call.
By reconsidering your debt position, you may find it possible to refinance your existing loan(s) to obtain a better interest rate. You may wish to speak to us about this. We can assist you by having our referral partner give you a call to discuss your loan structure and/or repayment schedule.
Shares, capital gains and losses
If you have a capital gain in the 2017 year, any capital loss in the same year will reduce the tax payable on that gain. It may be worthwhile to look at your non-performing investments to see if any investment should be sold before 30 June, so that the capital loss can offset against the capital gain.
Similarly if you intend to sell investments and realise a capital gain, consider deferring the sale till July 2017 to ensure any Capital Gains Tax liability is deferred for another year.
Family Tax Benefit deadline – 30 June 2017
Families have until 30 June 2017 to lodge their 2016 income tax returns. Failure to lodge your 2016 income tax returns by this date may result in Centrelink cutting your family assistance payments.