2024 Tax Planning Guide for Individuals and Families

With the end of the financial year approaching, it’s a good time to think about what strategies you have in place, or can implement now, to responsibly minimise your tax.   

While the most recent Federal Budget has not resulted in very many changes, we encourage you to read through the information we have provided below. This will help ensure you are taking up any opportunities to reduce your tax and keep more money in your pocket and savings. 

STAGE 3 TAX CUTS FROM 1 JULY 2024

You will have heard about the Stage 3 Tax Cuts that are applicable from 1 July 2024. These changes were passed in late February 2024, and will provide a lower tax rate for everyone earning more than $18,200 per annum. 

You can read the details of the changes and how you will benefit in our article from earlier this year. 

If practical, we recommend you arrange for the receipt of Investment Income (e.g. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2024. This will ensure that this income is taxed at next year’s lower rates. 

Reminder: if you are selling assets, the Contract Date (not the Settlement Date) is generally the key date for working out when a sale or purchase occurred for Capital Gains Tax purposes.

Below are the current financial year tax rates and the upcoming tax rates:

*Plus 2% Medicare Levy

HOME OFFICE EXPENSES

With so many people working from home these days you may have expenses you can claim a deduction for. The ATO allows you to claim using a Fixed Rate Method of $0.67 per work hour for the 2024 year. This amount is claimed instead of claiming individual expenses, and you need to keep a detailed record of how you calculated the number of hours you are claiming. You can also claim expenses using an “Actual Cost” method – so please keep all invoice and receipts during the entire year to prove all claims.

MOTOR VEHICLE LOGBOOK

Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2024. You should make a record of your odometer reading as at 30 June 2024 and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a logbook can generally be used for a 5-year period.

An alternative (with no logbook needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

DEDUCTIBLE SUPER CAP 

The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75. Individuals need to pass a work test if over age 67.

To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2024. The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.

It’s important to note that your superannuation guarantee, paid by your employer, is included in the cap mentioned above. 

Another way to achieve this is to salary sacrifice into your super. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax. This can be especially beneficial for employees nearing their retirement age.

Note: for the upcoming 24/25 financial year, the concessional cap will increase to $30,000, which offers a further planning opportunity to get money into the tax effective super environment. 

CARRIED FORWARD CONTRIBUTIONS

Carry-forward contributions are not a new type of contribution, they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap ($25,000 from 2019 to 2021, and $27,500 for 2021 and 2023), you may qualify to carry-forward the unused amount and take advantage of it up to five years later.

To be eligible for a carried forward contribution, your total super balance needs to be less than $500,000 at 30 June of the previous financial year.

Carry-forward contributions are calculated on a rolling basis over five years, but any amount not used after five years expires. These carry-forward rules only relate to concessional contributions into super, not non-concessional contributions, as they have different caps.

After this year any unused 2019 concessional contributions cap will be lost forever – so now is the time to carefully consider this. 

GOVERNMENT CO-CONTRIBUTION TO YOUR SUPER

If you are on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to super, you may be eligible for a Government co-contribution of up to $500.

In 2024, the maximum co-contribution is available if you contribute $1,000 and earn $43,445 or less. A lower amount may be received if you contribute less than $1,000 and/or earn between $43,445 and $58,445.

SPOUSE SUPER CONTRIBUTIONS

You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria, and your super fund allows it. This is known as contribution splitting.

Doing this not only helps to boost your spouse’s retirement savings, but it can also help you save tax if your spouse has limited income.

You may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse if your spouse’s income is $37,000 p.a. or less.

The offset gradually reduces for income above $37,000 p.a. and completely phases out at $40,000 p.a. and above.

ADDITIONAL TAX ON SUPER CONTRIBUTIONS BY HIGH INCOME EARNERS

The income threshold at which the additional 15% (‘Division 293’) tax is payable on super is $250,000 p.a. Where you are required to pay this additional tax, making super contributions within the cap is still a tax effective strategy.

With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare levy).

Note: when considering placing money into super, tax is just one of the considerations. Seek the advice of a licensed financial advisor who can guide you through the pros and cons and provide you with personalised advice. Any commentary in this article is of a general nature and does not consider your objectives, financial situation or needs.

OWNERSHIP OF INVESTMENTS

A longer-term tax planning strategy can be reviewing the ownership of your investments. Any change of ownership needs to be carefully planned due to Capital Gains Tax and Stamp Duty implications. Please seek advice from us prior to making any changes.

Investments may be owned by a Family Trust, which has the key advantage of providing flexibility in distributing income on an annual basis and an ability for up to $416 per year to be distributed to under 18-year-old children or grandchildren tax-free.

PROPERTY DEPRECIATION REPORT

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) may allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself.

The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

PREPAY EXPENSES AND INTEREST

Expenses relating to investment activities can be prepaid before 30 June 2024. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.

INSURANCE PREMIUMS

Possibly your greatest financial asset is your ability to earn an income. Income Protection Insurance generally replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is normally tax deductible, plus you get the benefit of protecting your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind. Like rental property interest, income protection premiums can also be pre-paid for 12 months to increase your deductions.

REALISE CAPITAL LOSSES

Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June 2024 to crystallise a capital loss and reduce or even eliminate any potential Capital Gains Tax liability. Unused capital losses can be carried forward to offset future capital gains.

TALK TO US

We will be discussing these opportunities with many of our clients as part of year-end tax planning.

If you would like further information, then please book an appointment to talk to your WLF Advisor before the 30 June 2024 deadline so we can assist you to responsibly minimise your tax.

The information provided is of a general nature only, in preparing it we did not take into account your investment objectives, financial situation or particular needs.