With the end of financial year almost here, it’s time to take stock of activities during 2024 that will impact on compliance and tax for the year and also look ahead to planning for next financial year commencing 1 July 2024. Of key importance is the requirement for trustees of discretionary trusts to consider how best to distribute trust income and capital for the 2024 year to eligible and appropriate beneficiaries.
You should consider taking the following actions, which could reduce your 2024 income tax bill – most need to be actioned, cashflow permitting, before 30 June 2024:-
- Pay any super contributions intended for the 2024 year by the appropriate deadline for your superfund (often 21 June) or 14 June if using Xero (so they are cleared to the superfund account by Friday 28 June.
- You will need to subtract from the threshold any employer superannuation (including super guarantee) that would have been physically paid to your respective funds in the 2024 financial year when calculating the remaining concessional cap of $27,500.
- You are able to claim a full deduction for eligible personal super contributions you make to your superfund, and you do not need to do this through salary sacrifice, even if you receive employment income.
- Make sure your motor vehicle log book or work-related travel diary is up to date to substantiate any work related expenses deductions. If you claim a tax deduction for work related motor vehicle expenses, you should note your odometer records at 30 June each year so that you can calculate the kilometres travelled. Maintaining a logbook of work-related use of your vehicle will usually maximise the tax deduction you can claim. If your current logbook is 5 years old you will need a new one for a continuous 12 week period.
- Tax rates for FY2024 remain the same as FY2023, however, they will change for FY2025 in line with the Stage 3 Tax Cuts. Changes to the tax rates are effective from 1 July 2024.
Other recent changes to legislation applicable to this financial year:-
Revised Stage 3 tax cuts
Current 2023-2024 rates
New thresholds in 2024-2025
Superannuation
- Both employees and self-employed individuals can claim a tax deduction annually to a maximum of $27,500 for personal superannuation contributions, provided the superannuation fund has physically received the contribution by 30 June 2024 and the individual has provided their superannuation fund with a notice of intention to claim. Employees can also top-up their employer’s superannuation guarantee contributions to the $27,500 limit and claim a tax deduction in their personal tax return. From 1 July 2024, the annual deductible threshold will increase to $30,000.
- Payments to a superannuation fund should be made sufficiently in advance of 30 June to ensure there is time for the payment to be processed and credited to the fund’s bank account by 30 June. If it is not credited to the fund’s bank account by 30 June, the deduction will be deferred to the next income year. You must ensure that the relevant paperwork is submitted to the superfund and confirmation is received back from the fund by 30 June 2025 (usually before you lodge your FY2024 tax return) to ensure you can claim the tax deduction for any personal super contributions against FY2024 income.
- The eligibility age for the Downsizer Scheme was lowered from 60 to 55 years on 1 January 2023. The Downsizer Scheme allows eligible people who sell their home to make a one-off, $300,000 contribution to their super, outside the concessional and other rules. Couples can contribute $300,000 each.
- If your superannuation balance is below $500,000 as at the previous 30 June, you can contribute more to superannuation than the annual $27,500 deductible contribution cap, where your contributions in prior years were below the concessional contribution cap of that year. Employer contributions are counted for this purpose, and there are contribution and timing limits. You can carry forward unused concessional contribution caps for 5 years from FY2019. Any unused caps from FY2019 that are not used by 30 June 2024 will be lost after that date.
See Heather Moore’s guide to concessional contributions for more information.
Deduct work-related expenses
- Taxpayers who are over-claiming work-related expenses (e.g. vehicle, travel, internet and mobile phone and self-education) are on the ATO’s hit list.
- Although a myriad of tax law considerations is involved when claiming work-related expenses, the three main rules are:
– Only claim a deduction for money actually spent (and not reimbursed);
– The work-related expense must directly relate to the earning of income; and
– You must have a record to prove the expense. - Any items purchased for more than $300 will be claimed over the life of the item, rather than immediately in the year of purchase.
- The ATO website is a great resource for all the specific rules in this area.
Working from home deductions
- You can claim a deduction of 67 cents for each hour you work from home, as a representation of all additional running expenses incurred as a result of working from home. However, there are still some record keeping requirements.
- Alternatively, the actual work-related portion, calculated for all running costs, continues to be available as usual.
First Home Super Saver Scheme
- A first home buyer can contribute a maximum of $15,000 a year (take care not to breach the $27,500 concessional contributions cap) to save for a deposit to buy a first home.
- The maximum amount that can be saved in such a way is $50,000 across all years. Provided the buyer’s partner does not already own his or her first home, the couple can put in a maximum of $100,000 ($50,000 x 2) to buy a first home.
- Money saved in this way can only be withdrawn from the superannuation fund with strict rules applying on how to use such withdrawn money (e.g. must buy a home within a certain time and the ATO must be notified of the withdrawal).
- Withdrawn funds are subject to income tax withheld at your marginal rate, less a 30% offset. The amount withdrawn must be included as assessable income in your income tax return for that year, along with the tax withheld.
We welcome your call to discuss tax planning for you individually as well as for your business.
As always, if you have any questions or concerns about your tax planning for this financial year – speak to your Knight partner. They’re with you every step of the way.
