With changes to income tax rates from July 1, the end of this financial year is particularly significant for high-income earners. The upcoming stage three tax cuts will reduce the overall tax burden in the next financial year, creating an opportunity to optimise your tax return. By bringing deductions forward and deferring income, you can lower your assessable income now and take advantage of lower tax rates in the future. Here’s how to maximise your tax return for 2024.
1. Bring Forward Tax-Deductible Payments
If you’re in a strong cash flow position, consider bringing forward tax-deductible payments such as income protection insurance, work-related subscriptions, union fees, technology, and work-related travel. Business owners can pre-pay insurances, and investors can pre-pay interest on loans and landlord insurance. Doing so allows you to benefit from this year’s higher tax rates before they decrease in the following year.
2. Delay the Receipt of Income
For business owners, delaying invoicing until after July 1 will push income into the next financial year, allowing you to be taxed at a lower rate. Employees expecting bonuses before June 30 can request payment in July to benefit from the new tax thresholds. This is especially beneficial for those nearing the current tax brackets, as the thresholds for the 37% and 45% tax rates will rise next year.
3. Sell Loss-Making Investments
If you’ve realised capital gains this year, offset them by selling loss-making investments before June 30. However, be cautious of wash sales — selling an asset for a loss and quickly repurchasing it. The ATO monitors wash sales, and any suspicious activity could lead to rejection of your capital loss claim.
4. Make Charitable Donations
Donations to an Australian deductible gift recipient of $2 or more are fully tax-deductible. If you’re uncertain about which charity to support or the donation amount, consider donating to a sub-fund within a public ancillary fund. You’ll receive an immediate deduction but can distribute the funds to charities later. This allows for thoughtful, long-term giving decisions while optimising your tax position.
5. Repair Investment Properties or Holiday Homes
If you’ve been delaying repairs to investment properties or holiday homes, complete them before June 30 to claim a deduction. Be mindful that only genuine repairs qualify for immediate deduction, while capital improvements must be depreciated over time. The ATO is scrutinising rental property claims, so ensure you understand whether your expenses qualify as repairs or capital works.
6. Claim Work-Related Expenses
Claiming work-related expenses is another area under ATO scrutiny this year. Whether you’re claiming home office expenses, work-related travel, or equipment, ensure you have accurate records. You can use the fixed-rate method to claim 67¢ per hour for home office work, or the actual cost method if you have detailed receipts for your expenses. Remember, double-dipping into work-related deductions is prohibited.
7. Max Out Super Contributions
Maximising your concessional super contributions is a powerful way to reduce taxable income. Contributions are capped at $27,500 per year, including employer and personal contributions. If you have unused contributions from previous years and a super balance below $500,000, you can take advantage of a five-year catch-up provision to further reduce your tax burden.
8. Time Your Tax Return
Avoid rushing to file your tax return in July. Waiting until the end of July allows important details like bank information, health insurance, and employee earnings to be pre-filled, reducing the likelihood of errors. The ATO has warned that early filers are twice as likely to have their returns queried, so take your time and ensure accuracy.
Maximise Your Tax Savings with Boa & Co. Chartered Accountants
At Boa & Co., we specialise in helping high-income earners optimise their tax returns. Our team of experts is ready to assist you with personalised strategies to take advantage of upcoming tax cuts, ensuring you claim every deduction available.
Get in touch today! Call us at 1300 952 286, email us at service@boanco.com.au, or visit our website at www.boanco.com.au. We’ll guide you through this tax season with confidence, ensuring you get the most out of your tax return.