There are legal and practical ways of reducing your tax. This may be particularly relevant when you:
Just a note though, while tax savings are great, unless the actions taken are improving your business now, or in the future, they should definitely not be your only determining factor on your investment and spending actions. Cashflow considerations and cost/benefit analysis should also be undertaken amongst other things.
Below are some of the general measures you can take to delay tax or increase tax refunds/reduce payables. Advice specific to your situation should be sought before taking action.
Everyone
- Bring forward business/work related expenses that will be necessary next year, to now (ie: prior to 30 June).
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Salary sacrifice into superannuation/personally contribute to your superannuation fund. Limits apply (2024: $27,500; 2025 $30,000 including your employer superannuation, with carry forward applicable in some circumstances), so do be careful and obtain specific advice before taking action.
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If you have made a capital gain this year, review your portfolio for any capital losses you could potentially realise to offset some of your capital gain. Note, capital gains transactions are based on the date of contract, not the date of settlement, therefore, if you are wishing to delay a capital gain to next year, the contract date (offer and acceptance) must be after 1 July 2024.
- Please note, Cryptocurrency investments are generally considered a capital gain transaction. Some platforms sell or swap crypto throughout the year, which are capital gains transactions which are required to be reported each financial year.
- Please ensure you obtain these records for each transaction, summarise and/or provide at tax time.
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If you use your vehicle heavily for business/work, you should consider doing a 12-week Logbook before you come in and see us to maximise your tax deduction. The ATO now only allows deductions for motor vehicles at a rate of 85c/km (2023 78c/km) up to 5,000km with adequate substantiation, or under the logbook method.
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Ensure you have diary evidence of work-related use for your home office, have highlighted your business/work use on an itemised phone bill and gathered other appropriate documentation to support your claim for self-education and travel expense claims. The ATO have announced that these are some of their target areas this year.
- Alternatively, for your working from home time, you will be required to advise the hours you have worked from home throughout the year. A physical Working From Home Diary is required from 28 February 2023.
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Investment property depreciation – engage a quantity surveyor to assist with maximising your claim. They are typically a once off report which can be valid for up to 40 years.
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Review your last year’s tax return to see what you may have claimed last year, and start gathering evidence for your deductions now!
Small to Medium Business
- Instant Asset Write Off for equipment over $20,000 ceased 30 June 2023. A deduction for assets costing less than $20,000 remains for up to 30 June 2024 (assuming legislation passes which is has not yet). Therefore, consider the small business instant asset write off available for asset purchases used for your business (at the business use %). Note that limits apply to motor vehicles and logbooks are required, with only the business use percentage being deductible. Other asset exclusions apply (Building capital works etc) and fringe benefits tax may apply also.
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Pay Super - Ensure existing superannuation payable for the quarter ending 30 June, is paid and received by your employee’s superannuation fund prior to 30 June (super is deductible when paid). We recommend this be actioned by 19 June to allow time for it to clear into the superannuation fund by 30 June.
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Pay your creditors before 30 June (if you are lodging your tax on the receipts basis versus accruals).
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Look at your last year’s depreciation schedule (in your tax return or financial statements) and advise us of any items which have been scrapped, sold or need to be written off.
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Consider your debtors and whether any of these should be classed as bad debts and written off.
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Consider bringing forward purchases of tools of trade and FBT exempt items such as handheld/portable tools of trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones used for business purposes.
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Defer income – if in a position to do so, you may consider holding off on your invoice issuing to the end of June so that there is less chance of being paid in this current financial year (delay tax) - again, only for those who prepare their tax on a receipts basis.
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Bring forward expenses – consumables, marketing materials, stationery, printing, office and computer supplies, rent – to allow the deduction in this year, but reap the benefits next year.
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Bring forward planned repairs and maintenance before 30 June.
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For directors/shareholders of companies, ensure you make minimum repayments (as a minimum) or completely pay off private company (“Division 7A”) loans (where you have used money of the company for personal purposes without having declared and taxed as a wage (with super), or declared (minutes, ensured frankable, documentation) it as a dividend). Loan’s unable to be repaid by 30 June require a Division 7A loan agreement.
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Complete year-end stocktake / work in progress if necessary based on your industry and level of stock – consider writing off obsolete or worthless stock.
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Consider prepayments (up to 12 months) on expenses such as subscriptions, insurance etc prior to 30 June to obtain the tax deduction this year.