Strategic Tax Planning and Minimisation Opportunities

Time to start Tax Minimisation Planning!

The long-anticipated stage 3 tax cuts, greenlit in 2018 and set to unfold in the 2024/25 income year, are finally upon us, however not without some last-minute tweaks by the Labour Government, which now deliver more attractive tax cuts to those that fall in the lower and middle-income brackets.

Considering the stage 3 tax cuts, planning and exploring opportunities to bring forward deductions is crucial to optimise your tax position.

To help prepare you, we have outlined below some key tax minimisation strategies you may wish to consider and discuss with your advisor.

Strategic Approaches for All Clients:

1. Bring Forward Deductions:
• Top taxpayers can benefit significantly by bringing forward deductions to this financial year. This can result in substantial tax savings, especially for those earning less than $135,000.

2. Super Contributions:
• Individuals with a total super balance below $500,000 can benefit from utilising their carry-forward unused concessional contributions cap amounts in the current financial year. Explore opportunities to top up super through salary sacrifice. Doing so reduces taxable income, keeping you in a lower tax bracket, and the additional super contribution is taxed at just 15%.

3. Consider Novated Leases for Electric Vehicle Purchases
• Leasing an electric car through salary packaging and government concessions can reduce taxable income. This presents a unique opportunity to upgrade your vehicle while enjoying tax benefits.

4. Utilise Negative Gearing:
• Offsetting interest on a loan used to purchase an income-producing asset against earned income can be a valuable strategy, especially if your income pushes you into a higher tax bracket. Remember that you must keep proper documentation to support your deductions. The ATO requires you to keep records for five years, in most cases, from the date you lodge your tax return.

5. Maximise and Claim All Deductions in 2023/24 FY
• Ensure you claim every deduction available to you, including business travel expenses, equipment purchases, and depreciation of assets. Maximising deductions is crucial to reducing taxable income. Bringing forward certain future expenses into the current financial year can maximise tax deductions, especially for repairs and maintenance of investment properties.

6. Postpone Income Collection:
• For businesses reporting income on a cash basis, consider the timing of invoicing and debt collection. Money collected after June 30 2024 will contribute to next year’s taxable income at the lower tax bracket.

7. Optimise Capital Gains Tax (CGT):
• Take advantage of the 50% CGT discount for assets owned for 12 months or more. Combining this with strategic deductions can reduce the tax payable on long-term investment assets. If you are considering selling an investment property, perhaps delay the sale until the 2024 financial year to take advantage of the tax savings.

8. Increase Charitable Donations:
• Donations of money or property can be claimed as deductions. Consider increasing charitable contributions before June 30, 2024 to maximise your deductions in this financial year.

9. Prepay or Delay Deductible Expenses:
• Various deductible expenses such as subscriptions, conferences, business travel expenses, leases can be pre-paid, offering a tax-effective strategy. Ensure the expenses meet the criteria and are related to a period of less than 13 months.

If you believe your taxable income in the next financial year will creep into a higher tax bracket, consider delaying the payment of any deductible expenses until after June 30, 2024.

10. Delaying Taxable Events
• Postponing events leading to increased taxable income until 2024-25 or later may lower your tax liabilities. This may include delaying retirement or the sale of capital gains tax (CGT) assets such as shares or assets (ie business equipment, vehicles or investment properties).

How Morrows Can Help – Strategic Tax Planning Session

Considering the stage 3 tax cuts, it’s crucial to plan ahead and explore opportunities to bring forward deductions, optimising your tax position. To ensure a well-considered approach to maximise your income and minimise your tax bill, we invite you to schedule a meeting with your advisor sooner rather than later. This will give us enough time to discuss, plan and execute your personalised strategies aligned with the upcoming tax changes.

Want to learn more Tax Minimisation Strategies? Download our Tax Minimisation Guides

Our advisors have prepared two 2024 Tax Minimisation guides. These guides outline the various strategies we can consider helping reduce your personal or business tax bill this financial year. Fill in your details below, to gain access to these guides for free.