Get your tax planning ducks in a row

By Chris Burnett

With the end of the financial year fast approaching, now is the best time to start to put in place and execute tax planning strategies to help minimise tax.  With 7 weeks out before 30 June, we find ourselves in a position where we have more accurate information and a pretty good picture as to how this year is going to shape up but still suffice time to explore tax planning opportunities and execute those strategies correctly. 

Our main tip here is to make sure that you give yourself planning time to ‘get your ducks in a row’ and book in with us now.  We can help identify opportunities and implement a plan to defer and reduce the tax you pay.  We’ve listed 5 tips you may want to consider when tax planning this year:

TIP #1 Know your individual situation

The first step of tax planning is to review your current situation and look at both your expected taxable income for the current financial year (2018-19); and your projected/ expected taxable income for 2019-20.  It’s important to know what your current year marginal tax rate is and how it may change next year (i.e. do you expect to earn more or less next year).  Knowing these will help guide you through your tax planning strategy.

TIP #2 Bring forward or prepay an expense

Consider bringing forward expenditure that you will otherwise incur after 30 June.  In most cases just receiving the invoice before 30 June will ensure that you’ve ‘incurred’ the expense this year – even if it’s not paid until next financial year.

If you have a loan that was used to purchase an investment (such as property or shares), consider prepaying 12 months of interest in advance before 30 June.  This will bring forward your deduction to this financial year providing immediate tax relief.

TIP #3 Consider putting some extra contributions into super

Putting extra contributions into superannuation can be one of the best ways to lower your taxable income and boost your tax refund.  For most people super contributions get taxed concessionally at 15%.  This is an attractive tax rate when compared with those rates that we pay at a personal level.  As an example, if someone earns $80,000 per year and they tip in an extra $10,000 into their super fund before 30 June and claim this as a deduction in their 2019 tax return, they will boost their tax refund by $3,450!  Remember that there are caps on how much you can contribute so its best to talk with us before making a contribution to ensure that you don’t exceed your cap.        

TIP #4 Take advantage of opportunities when you can   

The Federal Government has again increased the immediate write-off to $30,000 for eligible assets.  They have also expanded the application.  Businesses with aggregated annual turnover of less than $50 million are now eligible for the incentive.  If purchasing a piece of equipment or a new motor vehicle was on your agenda, then you may want to consider purchasing it before 30 June (even if it is financed), and claim the entire amount as a tax deduction this year.

TIP #5 Pay super obligations before 30 June

Unlike other expenses and you only get a tax deduction for superannuation when it is physically paid to the super fund.  For a lot of businesses, the June 2019 quarter isn’t due to be paid to the super fund until 28 July (i.e. next financial year).  If you already know what your superannuation obligation is for the quarter you may want to make payment of the business’ super obligation before 30 June and take benefit of the deduction this year instead of deferring it to next year.  

These are only a few tax planning strategies that can be useful and may not suit everyone’s objectives.  It’s best to book in an appointment with myself so that I can help tailor some strategies that meet your individual needs and objectives.