Tax Planning Tips and Updates for 2024

/ Neehal Singh

Introduction

As the financial year moves along, getting your tax planning right can really help you maximize your earnings and minimize those dreaded tax liabilities. Keeping up with the latest tax rules and being strategic can make a big difference to your financial health. Here are some top tax planning tips and updates for 2024 to help you stay ahead of the game.

1. Know the Latest Tax Brackets

Every year, the Australian Tax Office (ATO) updates tax brackets. For the 2023-2024 financial year, here’s what you need to know:

  • 0 – $18,200: No tax
  • $18,201 – $45,000: 19%
  • $45,001 – $120,000: 32.5%
  • $120,001 – $180,000: 37%
  • Above $180,000: 45%

2. Make the Most of Deductions and Offsets

Reducing your taxable income by claiming deductions is a great way to save on tax. Here are some key deductions you should be aware of:

  • Work-related expenses: Travel, uniforms, and professional subscriptions are all deductible.
  • Home office expenses: If you work from home, you can claim a portion of your expenses like electricity, internet, and office furniture.
  • Investment property expenses: Things like interest on loans, maintenance costs, and depreciation on assets like appliances can be deducted.

3. Smart Purchases Before FY2024 Ends

With tax rates expected to be lower in 2025, it’s a good idea to make certain purchases before the end of FY2024. This way, you can maximize your deductions at the current higher tax rates:

  • Work-Related Items: Think about buying any tools, equipment, or uniforms you need before the end of FY2024.
  • Professional Development: Sign up for courses, seminars, or conferences that can boost your skills and claim these expenses as deductions.
  • Office Equipment: If you need a new computer, desk, or ergonomic chair, consider buying it now.

4. Boost Your Superannuation

Contributing to your superannuation can be a tax-effective way to save for retirement. Here’s how you can make the most of it:

  • Concessional contributions: You can contribute up to $27,500 per year from your pre-tax income, which reduces your taxable income.
  • Non-concessional contributions: You can add up to $110,000 per year from your after-tax income without extra tax.

5. Use Tax Offsets

Tax offsets reduce the amount of tax you need to pay. Some common ones include:

  • Low Income Tax Offset (LITO): You can get up to $700 if your income is up to $66,667.

6. Tax-Loss Harvesting

Tax-loss harvesting is a legal way to offset capital gains by selling investments that aren’t doing well. Here’s how it works:

  • Capital Gains Tax (CGT): When you sell shares or other investments at a profit, you pay CGT. If you hold investments for more than 12 months, you get a 50% CGT discount.
  • Capital Losses: If you sell shares at a loss, you can use this loss to offset your capital gains, reducing your taxable amount. This is called Tax-Loss Harvesting and it is legal to do so. Example: If you have a $20,000 capital gain and a $10,000 capital loss, your net capital gain is $10,000. With the CGT discount, this reduces to $5,000, lowering your tax liability.
  • Carry Forward Losses: If your capital losses are more than your gains, you can carry forward the excess losses to future years.

7. Keep Good Records

Keeping detailed records of your income, expenses, and deductions throughout the year makes tax time easier and ensures you can back up your claims:

  • Receipts and invoices: Organize all your deductible expense receipts.
  • Statements: Keep bank and financial institution statements that show your income and interest.
  • Logbooks: If you use your vehicle for work, keep an accurate log of your business kilometers.

8. Stay Updated on Tax Changes

Tax laws change all the time, so staying informed is crucial. For 2024, here are some key updates:

  • Temporary Full Expensing: Businesses can immediately deduct the business portion of the cost of eligible depreciating assets.
  • Loss Carry Back: Eligible companies can carry back tax losses to offset previously taxed profits, helping with cash flow.

Conclusion

Tax planning is an ongoing process that requires staying informed and proactive. By understanding the latest tax rules and using available strategies, you can optimize your financial position and stay compliant. Remember to consult a tax professional to tailor these tips to your specific situation. Taking advantage of higher tax rates in 2024 by making necessary purchases and utilizing deductions can lead to more significant tax benefits compared to the anticipated lower tax rates in 2025.

Recommendation

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