End of year tax planningWhat last minute Tax planning can you do?

Your best plan is to start your tax planning at the beginning of the year. Finding deductions and limiting income is a minor part of tax planning. Good structure and strategies will set you up for the long term tax advantages with the bonus of Asset protection.

The coming year:

After July 1, 2012, all individual tax rates will be changing due to the introduction of the carbon tax.

  • The tax-free threshold will rise from $6,000 to $18,200.
  • From $18,201 up to $37,000 the marginal rates will be 19%
  • From $37,001 to $80,000, then 32.5%
  • From $80,001 to $180,000 37%
  • From $180,001 and above 45%.

The following tips may suit your situation; if you need further assistance feel free to enquire.

Pre-pay investment loan interest

Negotiate with your lender on your investment property or share portfolio loan to pay interest on borrowings upfront, giving you a deduction this year. Generally taxpayers can claim a deduction for up to 12 months ahead. Ensure your lender allocates the payment correctly, as the deduction is only allowed against the costs of financing income producing investments, such as interest charged on borrowings.

Bring forward expenses, defer income

Endevour to bring forward any deductions (like the interest payments mentioned above) into the 2011-12 year. This is advantageous for those who believe they will earn less in the next year than this year.

Alternatively, if you expect to earn more next financial year, you may wish to delay any tax-deductible payments until next financial year. You may in fact be advantaged by the higher tax free threshold arising out of the carbon tax package in 2012/2013.

A simple deferral strategy that could be used earlier in the financial year to defer interest income, may be to place funds into a term deposit maturing post June 30.

Use the CGT rules to your advantage

If you have made a capital gain from your investments this financial year, such as the sale of your investment property or long term shares, this will be added to your assessable income. Consider selling any investments on which you have made a loss before June 30. Your gains can be then offset against your losses, reducing your overall taxable income.

You should always consider all factors affecting your investments decisions, not merely consider a tax deferral strategy in isolation.

Contribute as much as you can into superannuation within the limits. (The limits change from 1st July 2012).

This financial year those less than 50 years of age can contribute up to $25,000 (pre-tax) into their super fund, and those between 50 years and 74 years are able to contribute up to $50,000 (pre-tax). (Some conditions do apply post 65 years of age).

AfterJuly 1, 2012, the cap will be $25,000 for everyone.

Warning: exceeding the limits can lead to excess contributions tax. You should be aware that the 9% contributed by your employer counts towards these limits.

Co-Contribution changes for the lower income worker

You may also like to take advantage of the government’s co-contribution policy while it lasts at its present level. Under the current rules, the government pays dollar-for-dollar (up to $1,000) from incomes of $31,920, reducing up to, and phasing out at, $61,920. Post 1st of July 2012 the matching rate will be reduced to 50%, with a maximum co-contribution of $500 for people with incomes up to $31,920 in 2012-13 (phasing out at $46,920).

Children still at school?

This is the last year of the Education tax refund for those clients with children at school. You may be entitled to a refund of 50% of expenses, up to a maximum of $409 for primary school children and $818 for secondary students for the 2011/12. The refund is available for items like laptops, educational software, textbooks and, for the first time, uniforms (included fromJuly 1, 2011). School fees are not covered.

In the 2012/13 year each family with a primary school child will receive a payment of $410 per annum while a secondary school child will receive $820 per annum. No receipts need to be kept but the family must be in receipt of Family Tax Benefit Part A (FTBA) or other qualifying income support payment.

Immediate write off for Small Business Entities (turnover less than $2 million)

In the 2012/13 year Small Businesses are entitled to an immediate write off of the purchase of an eligible business asset costing less than $6,500 and are entitled to the write off of the first $5,000 of a new or used motor vehicle. It may therefore be wise to delay any prospective purchase until the 2012/13 year.

Final reminders

You can claim up to $300 of work-related expenses without receipts, provided the claims are for outgoings related to earning assessable income.

The above tax tips are not exhaustive nor do they suit every taxpayer, for more specific advice please call on or email us. Details on the website.

This publication is issued by TJD Accounting Services Pty Limited. The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. TJD Accounting Services Pty Ltd, any related entity or any of their officers, employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. 

TJD Accounting Services

319 Keilor Road

Essendon

VIC 3040

9379 4040