Tax Tips for Individuals & Businesses (2024)

WHAT IS TAX PLANNING?

Tax planning is the act of projecting your tax position and then arranging your financial affairs in a way that keeps your tax to a minimum. Tax planning is a legitimate activity so long as you do this within the intent of the law. Tax minimisation schemes that are outside the spirit of the law may attract the attention of the ATO. These are referred to as “tax avoidance schemes or arrangements.”

TAX TIPS FOR EVERYBODY

1. Refer to the ATO’s individual tax rates or company tax rates to determine your income tax bracket.
2. To roughly project your tax position simply refer to the total income and tax paid on your final FY June pay slip and plot these into an online calculator. If you are a business, enter your net profit and tax paid into the calculator.
3. Stimulus payments (eg JobKeeper / JobSeeker) form part of your taxable income and must be reported in your tax return in the same way as your normal wage. Centrelink will provide you with the equivalent of your payment summary for inclusion in your tax return. Centrelink also provides this information to the ATO so technically it should pre-fill into your tax return regardless.
4. No more payment summaries: Thanks to Single Touch Payroll, payment summaries are now a thing of the past. Most organisations now report their employee’s income, super and tax information directly to the ATO. If you use a tax agent, they should already have those details for you on file. If you prepare your own tax return, this information should also be waiting for you on MyGov.
5. Private Health Insurance: Similarly, health insurers are no longer required to send members a private health insurance statement this financial year. That means the information will again be automatically pre-filled in your tax return by July 20. If the information isn’t there by that date or if you plan to lodge a paper return, you will need to request a statement from your insurer, which can take 14 days to arrive.
6. $1080 tax offset: Last year, countless Australians rushed to lodge their tax returns as early as possible thanks to the promise of that infamous $1080 tax offset. The offset is back again this year – however it doesn’t mean you’ll get a $1080 lump sum. A tax offset reduces your overall tax bill. What this means is that you will either get a bigger refund than you normally would, or, you might end up having to pay less if you receive a tax bill. It’s worth anywhere from $255 to the full $1080, depending on how much you earn. Those who make more than $126,000 won’t get anything at all. Remember, just like last year, you don’t need to do anything to receive the benefit – it will automatically be calculated when you lodge your tax return.
7. Working from home tax deductions: In light of the fact that thousands more Australians are now working from home, the ATO have announced special arrangements that will enable those working from home to more easily claim home office running expenses in their tax returns. Such running expenses include: electricity, heating, air conditioning, consumables (e.g. stationery) and computer maintenance. As a result, there are now three methods that you can use to calculate your working from home tax deductions, depending on your situation. Check out our working from home blog post for further information.

TAX TIPS FOR SMALL BUSINESS

1. Traditionally many company directors decided on their wages at the time their tax returns were processed. This is no longer possible. Wages now need to be recorded and reported when physically paid, which this is one of the key reasons why taking time with your accountant to determine your optimal wage prior to 30 June is now more important than ever.
2. The instant asset write-off threshold has been raised to $150K. Therefore, you can purchase a business asset up to this value and write the whole cost off against your taxable income. This equates to a HUGE tax saving! As part of your tax planning you should consider which option is better for you: the improved instant asset write-off or standard depreciation. In cases where you are in a loss position, it will be better to depreciate your asset under traditional depreciation laws.
3. Avoid spending on business assets that you don’t totally need just for the sake of claiming a tax deduction. This is because you may find yourself paying $1 to save 30 cents in tax (based on the most common business tax rate).
4. Consider the method that you pay GST to the ATO. Do you lodge your BAS on a Cash or Accruals Basis? (Check the top left of your most recent BAS and it will tell you). If you lodge your BAS on a cash basis this means that you are paying GST to the ATO in the period in which you actually receive and pay the cash for your income and expenses. If you lodge your BAS on an accruals basis which is resulting you outlaying cash for your BAS before you actually receive it – then it may be time to consider a change.
5. Ensure the log books for your business vehicle are up to date. You will need to start a new log book if your current one is more than five years old or your business usage has changed significantly. You should also consider investing in one of the many mileage tracking digital apps available.
6. If your business carries stock, remember to do your stock take on 30 June. Why not set a reminder in your calendar now? If your estimated closing stock (and opening stock) is less than $5,000 you do not have to do a stocktake.
7. Consider GST on motor vehicle expenses. If you have been claiming 100% of the GST on your car expenses but your business use % was less than this, you will need to adjust your GST to claim the correct business amount in order that you are not over claiming the GST that you are entitled to.
8. Now may be a great time to look at the tax effectiveness of your current business structure. If a new business structure is appropriate, it is always far easiest to have the new structure start running on the first day of the new financial year. The small business restructure rollover strategy is an effective tax planning strategy in situations whereby you may be considering changing from a family partnership to a family trust structure. If you are a small business (SBE) you can transfer an active asset of your business (such as goodwill) to another SBE as part of a genuine business restructure where there is no change in the ownership of the asset – capital gains tax free.

MINIMISING TAX

The end of the tax year will soon be upon us.

Now is a great time to take a look at both your expected taxable income for the current financial year and your projected/expected taxable income next financial year, as these figures will help guide your tax planning strategy.

If you expect your current FY income to be HIGHER than next year consider:

• Prepaying some of your following FY expenses (such as rent, insurance or subscriptions ) in the current financial year.
• Taking advantage of the instant asset write-off.
• Reviewing and postponing some of your invoicing for the current tax year.
• Topping up your voluntary superannuation contributions.
• Reviewing your debtors and writing off any unrecoverable debts.

If you expect your current FY income to be LOWER than next year consider:

• Bringing forward any invoicing into the current financial year for work to be carried out next financial year.
• Paying your expenses as they are due, rather than prepaying them in advance during the current tax year.
• Purchasing any required equipment or business assets now rather than later.

Effective tax planning could potentially result in a significant legal tax saving. Regardless of if you are a sole trader, partner in a partnership, beneficiary of a trust or a company director; it is important that you take time to plan out your tax situation. Due to the introduction of single touch payroll laws, it is now more important than ever that company directors review the tax considerations relating to their situation before 30 June.

We offer a number of tax planning options which we tailor to your specific situation. For further information, don’t hesitate to get in touch with our team.

Alternatively, please feel free to book in a meeting.

• Sarah Lissant-Clayton
• May 16, 2020
• 10:01 pm