With our extensive knowledge and experience in tax planning, we recommend our clients take advantage of the 1 July 2024 tax cuts. By bringing forward your deductible expenses into 2023-24, you can potentially optimise your tax planning strategy. This could involve prepaying your deductible expenses where possible, making any deductible superannuation contributions, and strategically planning your donations to utilise the higher tax rate.
We summarise as follows:
Bolstering superannuation
If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes a superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction.
Understanding the concept of concessional cap amounts is key to maximising your superannuation savings. If your superannuation balance on 30 June 2023 was below $500,000, you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last five years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.
To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and get an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 75, you can only make a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).
In addition, if your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.
If you are likely to face a tax bill this year, for example, you made a capital gain on shares or property you sold, then making a more considerable personal superannuation contribution might help to offset the tax you owe.
Charitable donations
When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts over $2 as a tax deduction. The more tax you pay, the more valuable the tax-deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 for someone earning $180,000 or more (excluding Medicare levy).
Understanding the rules for deductible donations is key to making the most of your philanthropic efforts. To be deductible, the donation must be a gift and not in exchange for something. Keep in mind that special rules apply for amounts relating to charity auctions and fundraising events run by a DGR. By being aware of these rules, you can feel confident in your giving decisions and ensure your donations are making the maximum impact.
Philanthropic giving can be undertaken in several different ways. Rather than providing gifts to a specific charity, it might be worth exploring the option of giving to a public ancillary fund or setting up a private ancillary fund. Donations made to these funds can often qualify for an immediate deduction, with the fund then investing and managing the money over time. The fund generally needs to distribute a certain portion of its net assets to DGRs each year.
Investment property owners
If you do not already have one, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help you maximise your deductions.
