As we enter the final quarter of this financial year, it is crucial to deliberate on planning strategies for the upcoming year. Tax planning sessions offer an excellent opportunity to analyse your business’s current financial situation and engage in discussions about future planning, cashflow management, and preparation for tax liabilities. These sessions also assess the timing of income and purchases, planning for both large and small expenditures and investments, while also revisiting the basics and evaluating your business goals. At MJJ Accounting, we can provide a comprehensive review of your current business status and present strategic recommendations to ensure the most effective outcomes for your business in the future. If you are interested in booking a tax planning session with us, please contact the office by phone or email to arrange.
Entering a new financial year, it is the best time to reset your current finances and establish new systems and processes to help you stay on top of your income, expenses, and tax obligations. It is important to have a plan and revise what options are going to be best suited for you and your business.
Here are some useful tips:
Instant Asset Write Off changes
The Australian Government, in its 2023-24 Budget announcement, revealed a decrease in the instant asset write-off threshold to $20,000, intending to continue to enhance cash flow and ease compliance for small businesses. What does this signify for you? If your aggregate turnover is below $10 million, you can immediately deduct the entire cost of eligible assets, priced at less than $20,000, when they are first used, installed, and ready for use within the 2024 Financial Year. This elevated threshold is applicable on a per-asset basis, enabling the instant write-off for multiple assets. Assets surpassing the threshold will be allocated to a simplified depreciation pool, depreciated at 15% in the initial year and 30% in each subsequent year.
Tax rates decreasing next year
The Australian Government has proposed changes to individual income tax rates and thresholds effective from 1 July 2024, which include:
- Reduce the 19c tax rate to 16c
- Reduce the 32.5c tax rate to 30c
- Increase the threshold above which 37c tax rate applies from $120,000 to $135,000
- Increase the threshold above which 45c tax rate applies from $180,000 to $190,000
These tax cuts aim to provide more substantial reductions for middle-income earners, alleviating cost-of-living pressures and supporting the economic plan to manage inflation. Simultaneously, the adjustments seek to create a fairer tax system in Australia.
Considering these changes, you might contemplate deferring income until after 30 June 2024 if your cash flow allows for it and you have assessed the implications. The rationale behind deferring income is that it postpones associated tax obligations. With reduced rates and increased thresholds, deferring income could lead to lower tax payments. For instance, if you are considering selling shares in June 2024, it would be suggested to hold off until July, as the resulting income will be taxed at a lower rate.
Personal Superannuation Deductions
Just a reminder that you can boost your own super by making personal contributions, which are the amounts you voluntarily contribute directly to your super fund. When you contribute to your super, you are entitled to claim it as a tax deduction, categorized as a concessional contribution, effectively reducing your taxable income. However, while you can contribute any amount, your concessional contributions are capped at $27,500 per financial year, meaning that both employer contributions and personal contributions cannot exceed this limit. This strategy may be advantageous if you receive additional income that would otherwise be subject to personal income tax at a higher rate than the 15% tax applied to contributions into the fund.
If you have unused concessional cap amounts from previous years, you may be eligible to carry them forward to increase your contribution caps in later years. You may qualify if you:
- Have a total super balance less than $500,00 on 30 June of the previous financial year.
- Have unused concessional cap amounts from up to 5 pervious years.
Motor Vehicles Expenses
When claiming a deduction for car expenses, there are two methods:
Cents per kilometre
Under this method, you can claim 85 cents for each kilometre travelled for work, up to 5,000 kilometres during the financial year. This rate encompasses car expenses like decline in value, registration, insurance, maintenance, repairs, and fuel costs, and therefore, you cannot claim these expenses in addition to the work-related kilometres.
Requirements: Maintain a record of the number of kilometres driven for work in the financial year, either in a diary or using the myDeductions tool in the ATO app.
Logbook method
This method allows you to claim a proportion of work-related car expenses (registration, insurance, maintenance, repairs, and fuel costs) based on the percentage use of your car for work.
Requirements: Keep a record of the number of kilometres driven in a continuous 12-week period representing your usual travel pattern. Also, provide receipts for running expenses incurred while operating the car for work.
If you are wanting to maximise your motor vehicle deduction claims, it is important you have the correct records, depending on which option above is most suitable for you.
Work from Home Expenses
When claiming deductions for work from home expenses, there are two methods:
Fixed Cost Method
This method permits a claim of 67 cents for each hour worked from home during the financial year. It considers home office expenses such as electricity, gas, phone data and internet, stationery, and computer consumables.
Requirements: Keep a record of the number of hours worked at home for the financial year, documented through timesheets, rosters, or a diary.
For work-related use of technology and office furniture mainly used for work purposes, separate deductions can be claimed. If the cost is under $300, an immediate deduction can be claimed; for costs exceeding $300, a deduction for the decline in the value of the depreciating asset can be claimed.
Actual Cost
Under this method, you can claim a proportion of home expenses (depreciating assets, electricity, gas, phone data and internet, stationary, computer consumables, and office clearing) for their use in your home office.
Requirements: You will need to keep record of every expense to claim including receipts, bills and invoices. You can work out your work-related expenses using records for the entire year or overall 4 week period that represents your work use (for example, using a diary or itemised bill).
If you require specific advice or would like a review of your business and personal tax position prior to end of financial year, please contact our office to make an appointment.
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