TIME TO AXE YOUR TAX
By Claire Osborne, Chief Financial Officer
The tax office’s increasingly aggressive approach means you should ensure that your tax return is above reproach – but should still maximise your legitimate entitlements.
By this time in the financial year, most of us are starting to prepare for our end of financial year tax return. Rather than leave your preparations until June 30, it is a far better approach to give yourself enough time to look seriously for any possible ways to claim back some of the money you have already parted with to the tax commissioner or at least some strategies that will prevent having further large sums removed from those hard earned earnings in the future.
Pick a good day to start looking at your tax position as there is probably no other activity that is more likely to raise your blood pressure than to look at how much tax you have paid or are going to pay. Maybe it’s time for that yearly tax planning consultation with your accountant.
At OYA Financial we have an expert team of qualified accountants here to help. Call us on 02 9970 3111 for your free consultation now!
REDUCE YOUR TAX BILL
– more money in your hand
Many of the past tax reduction opportunities have gone, however steps can be taken to keep down your payments. Almost all year-end tax strategies revolve around one or more of the following:
- Minimising taxable income
- Minimising tax rates
- Maximising credits and rebates
- Deferring all possible income
- Accelerating all possible deductions
Tips for employees and self employed
PAYE taxpayers who don’t have other sources of income such a sproperty rentals or dividends on shares have the least room. Still salary sacrificing into super or spouse contribution rebates can make a difference.
Tips for small business Small business is always under the tax office spotlight. Each year the tax office advises us they are targeting a certain segment in business. Make sure your tax strategies still stand up to scrutiny with the tax office.
- Review shareholder loans
- Pay attention to one person companies
- Investigate industry benchmarks
- Offset capital gains and losses
- Ensure super contributions are paid for employees
- Include an accurate value of yuour stock on hand, not simply an estimate
- Be prepared for an audit
- Pre-pay expenses
Ways To Cut Your Tax
- Make sure you claim all the work related deductions you are entitled to
- Consider investing in shares, they can be very tax-effective
- Be aware of all the tax offsets/rebates that you may claim
- Use the benefits of superannuation rules
- Structure your investment to pay minimum tax
- See how smart timing pays off with investment gains and losses
- Understand the power of keeping good records
- If retiring, possibly better to do this in the new financial year
- Look at salary sacrificing into super
- Consider salary packaging if available to you through your employe
DEPENDENT SPOUSE TAX OFFSET
Labor has agreed to back the government on its proposed abolition of the Dependent Spouse Tax Offset. When this is passed, this will save the Budget about $600 million over the next 10 years.
Tax payers were able to claim an offset up to $2,400 if their spouse had an “adjustable” income of less than $10,422. This bill for the abolition should pass before 1st July.
TAX FREE THRESHOLD
Labor has also agreed to stop a legislated increase to the tax-free threshold from $18,200 to $19,400 due to start on 1st July. This will save almost $3 billion over four years and $7.7 billion over the next 10 years.
CLOSING THE RORT BY DOCTORS
Labor is likely to support a government initiative to crackdown on meal and entertainment fringe benefits tax concessions available for not-for-profit organisations and institutions such as hospitals. Limits will be lowered from $30K to $5K. The exemptions had good intentions to help such institutions augment salaries but the high cap resulted in rorts, including doctors claiming wedding expenses and parties. Good if you’re a doctor.
SUPERANNUATION TAX-FREE LIMIT
The superannuation peak body is pushing for a tax-free income in retirement restricted to $120,000 a year. Submissions to the government’s tax review support a limit of about $2.5 million on the amount of tax-free money each Australian can use to fund retirement. This would have a major impact on the 475 retired people who have super balances of $10 million or more with an average income of $1.5 million a year tax free. While the Prime Minister has vowed to make no changes to superannuation, the industry is pushing for changes, arguing the system currently is not economically sustainable.
ARE THERE BIG CHANGES ON THE WAY FOR SUPER AND TAX?
The government of the day has said there will be no changes to superannuation in its current term of office. The next election is just 12 months away.
Is it possible that the government in the future, whether Liberal or Labor, will not want people to take lump sums form super or restrict the amount of lump sum that can be taken? Yes, it is a possibility. There are not enough people in the workforce to support the Baby Boomers in retirement relying on full or part pension from Centrelink. The government will want people to commute their super in full or part to an allocated pension or annuity.
For those still with a home loan at retirement it could raise some serious questions. This could also have a detrimental effect on why people on a reasonable income may wish to invest after tax money into super. This has not come into effect yet and there is no bill before parliament now or being submitted.
One current change that will affect couple with their own home plus other assets worth more than $823,000 is that they will lose their pension altogether from 2017. The cap currently is $1.5 billion.