Tax Time FY24

The end of the financial year is almost here however, there is still time to increase tax efficiencies for FY24. Navigating the complexities of tax regulations and the impact of taxation on your financial situation can be challenging. We have prepared a short guide below on making the most of your tax affairs in the coming weeks and moving into FY25.

Key Strategies to Optimising Your Tax Position

Deductible Expenditure

Ensure all eligible income tax deductions are realised in the current financial year. The prepayment of deductible expenditure before June 30, 2024 will see a tax benefit in the current year. This could include subscriptions, donations to deductible gift recipients, insurance premiums, or even office supplies for those who work from home. Eligible small businesses will have access to the ATO’s instant asset write-off scheme. Where an asset of $20,000 or less is installed and ready for use before 30 June 2024, an instant tax deduction may be claimed. This applies to all eligible depreciable assets purchased.

Thorough records and receipts must be kept to substantiate all claims.

Capital Gains Tax (CGT)

CGT in Australia is a tax on the profit realized from the sale of non-inventory assets, such as real estate, shares, and businesses. This tax is calculated on the difference between the sale price and the asset’s original purchase price, adjusted for certain costs. If a capital gain has been realised throughout the year, it may be worth reviewing the portfolio for any under performing assets. Selling underperforming assets to realise a capital loss can offset capital gains made throughout the income year

Superannuation Contributions and Division 293 Tax

Making additional concessional (before-tax)  superannuation contributions to a complying superannuation fund can be a highly effective way to reduce taxable income. The current concessional contribution cap is $27,500 per year. Non-concessional (after-tax) contributions are also beneficial, particularly if the goal is to maximise retirement wealth. While these don’t reduce taxable income directly, they can grow tax-free within the super fund.

When making additional concessional superannuation contributions, the impact on Division 293 taxation must be kept in mind. Division 293 tax is an additional tax on individuals whose income, for Division 293 purposes, and concessional superannuation contributions in combination exceed $250,000. Division 293 tax is charged at 15% of the lesser of concessional contributions or the amount exceeding the $250,000 threshold.

Example:

Annie has Division 293 income of $240,000 and Division 293 concessional superannuation contributions of $26,400. The superannuation contributions now mean Annie has exceeded the $250,000 Division 293 threshold.

Annie’s superannuation contributions of $26,000 are greater than the $16,400 amount Annie’s Division 293 income has exceeded the $250,000 threshold ($240,000 + $26,400 – $250,000).

Therefore, Annie’s Division 293 tax payable is $2,460 (15% x $16,400).

Preparing for Stage 3 Tax Cuts

Earlier this year, the Australian governments announced the implementation of its propose Stage 3 tax cuts. These changes will see a decrease in marginal individual income tax rates starting 1 July 2024, aiming to ease cost-of-living pressures and stimulate economic growth. The upcoming tax rate changes may alter your financial strategies, particularly around income management, investments, and superannuation contributions.

Staying informed and proactive can make a significant difference in your financial health. By leveraging these strategies and seeking professional advice, you can effectively navigate the complexities of the tax system. Feel free to connect with us if you have any questions on the above or wish to arrange a consultation.