30 June is rapidly approaching and it is time to do some urgent tax planning. Dr Adrian Raftery, a senior lecturer in tax, financial planning and superannuation at Deakin University and author of 101 Ways to Save Money on Your Tax - Legally! 2017-2018 edition (Wiley, June 2017, AU$25.95), gives some excellent tips for you to action and maximise your tax refund this year.
1. Keeping a car log book could increase your refund by thousands
If you use your car for work purposes and keep a log book for 12 weeks then the deductions can be in the thousands. Make sure that you keep all costs associated with the running of your car (such as petrol, insurance, registration, servicing and lease payments) for the whole year, not just the period that you kept the log book. Remember that the ATO motto is no receipt = no deduction so you could be costing yourself $$$ by not keeping those dockets!
2. Take advantage of the Government’s free money service known as the “Super co-contribution”
It is surprising how few people actually take advantage of some free money from the Government. If your income is under $36,021 and you contribute $1,000 post tax into super the government will match it 50 cents in the dollar. Whilst this incentive gradually phases out above this figure at $51,021, it’s free money! Also, if you earn less than $10,800 then your spouse can put up to $3,000 into your super fund and they will receive an 18% rebate ($540) on tax via the spouse super contribution rebate.
3. Minimise capital gains tax (CGT) by deferring sale or offsetting losses against gains already made
The share market has had a roller coaster year in 2016/17. If you made a nice capital gain or two earlier in the year then you can reduce CGT by selling any non-performing shares that you may be currently holding. Any unrealised gains should be sold after 1 July to defer tax for another year. And remember that if you hold shares for more than 12 months you reduce CGT by half.
4. Build your nest egg quicker by paying 15% rather than 49% by salary sacrificing into super
Salary sacrificing into superannuation is one of the best, and legitimate, ways to minimise your income tax bill. You can contribute up to $30,000 per year into super ($35,000 for those aged 50 and over) which is only taxed at 15 per cent instead of your marginal tax rate (potentially 49 per cent). There are not many pay packets left to do it this tax year, so keep in mind to start putting extra away when 1 July arrives.
5. Income expected to be lower next year? Bring some 2017/18 expenses forward into this year
If you are expecting that you will have a lower income next year - due to factors such as maternity leave, redundancy, a smaller bonus or perhaps cutbacks to overtime - then why not try to bring forward your deductions into this tax year. Stocking up your home office with stationery, laptops and printers or prepaying subscriptions and interest for up to 12 months in advance are just some of the simple ways to reduce your income before 30 June.
6. Recontribution to split of superannuation balances between spouses
With substantial changes to superannuation occurring on 1 July 2017, financial planners across the country are working like crazy to maximise the benefits for individuals. $1.6 million is the magical figure to have superannuation tax-free in retirement so it is crucial that couples maximise their $3.2M combined tax-free balance and not have one spouse over the $1.6M threshold with one well under. A simple strategy would be to have the higher-balance spouse withdraw up to $540,000 in super and recontribute into the lower-balance spouse’s super under the three-year rolled forward rule for non-concessional contributions. Important to see a financial planning expert here.
7. Claim a deduction for the costs you incur in running your home-office
More and more people these days are doing work at home but not many are aware that they can claim a deduction for costs you incur in running your home office, even if a room is not set aside solely for work-related purposes. Deductions are available for the work-related portion of home telephone, internet, stationery, computer equipment and printers. Keep a diary of your time that you work from home and claim a 45 cents per hour deduction for electricity, gas and depreciation of home-based furniture.
8. Buy a new business asset for under $20,000 and claim it as a tax deduction this year
There have been some great tax concessions over the past few years for small businesses with none greater than the immediate write-off available for the purchase of new business assets that cost less than $20,000. There is no limit to the amount of assets that you can purchase under this concession but beware that you are only getting a percentage back and your cashflow will suffer. If your business is registered for GST, then you can buy a business asset for less than $22,000, claim the 10% GST credit and get an immediate write-off for the balance in this year’s tax.
9. Keep your receipts
With the ATO continuing to ramp up their audit activity yet again it is important that you keep your receipts. The ATO motto is no receipt = no deduction so you could be costing yourself $$$ by not keeping those dockets! The ATO have a great app called MyDeductions which is an easy way to keep your receipts for year end.
10. Get a great accountant
Avoid paying too much in tax or leaving yourself to a visit from the taxman. Great accountants are like surveyors ... they know where the boundaries are. And their fees are tax deductible!
You now have got some great tax tips, it’s time to take action. Times are tough so every dollar saved counts.
This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.