The end of the financial year (EOFY) is fast approaching – What should I do?
For many people the notion of completing an income tax return is daunting. It creates stress and worry. This is often associated with avoidance and deferral. Which, in-turn, creates more stress and worry.
Therefore give yourself a Call-to-Action!
If you’re not sure what to do, here are some important considerations.
1. Don’t do nothing
If you do nothing you are underpaying either yourself or the tax office. Either way, you lose.
It is very important that you submit a tax return. Therefore set aside some time and create a plan to ensure that you get it done. And if you have previous years where you have not submitted a tax return, then include these missed returns in your plan.
2. Prepare
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Planning:
Set aside time in your calendar for EOFY tasks. -
Gather your documents:
Collect all your receipts, bank statements, credit card statements and tax documents in a designated folder. This will help you become organised! -
Organisation:
By being organised it means that you will be less likely to overlook any legitimate deductions.
3. Need help?
- If you feel overwhelmed then get help. A book-keeper, tax agent or accountant will complete your tax return and set you up for the next year.
- If you seek professional assistance it is better to get the advice before the end of the financial year because you may be able to reduce your taxable income or maximise your deductions prior to 30 June.
4. Tax rates for Australian Residents in 2024 and 2025
The government has announced a reduction in income tax commencing 1 July 2024. The table shows the current marginal tax rates and the new marginal tax rates for the new financial year beginning on 1 July 2024.
|
2023-2024 income ($) |
Tax rates, excluding |
|
0 – 18,200 |
0% |
|
18,201 – 45,000 |
19% for each $1 over $18,200 |
|
45,001 – 120,000 |
$5,092 + 32.5% for each $1 over $45,000 |
|
120,001 – 180,000 |
$29,467 + 37% for each $1 over $120,000 |
|
180,001 + |
$51,667 + 45% for each $1 over $180,000 |
|
2024-2025 income ($) |
Tax rates, excluding |
|
0 – 18,200 |
0% |
|
18,201 – 45,000 |
16% for each $1 over $18,200 |
|
45,001 – 135,000 |
$4,288 + 30% for each $1 over $45,000 |
|
135,001 – 190,000 |
$31,288 + 37% for each $1 over $120,000 |
|
190,001 + |
$51,638 + 45% for each $1 over $190,000 |
5. End of year taxation strategies
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Maximise your legitimate deductions:
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- Confirm what money spent on materials, travel, education, resources, hardware, software, clothing etc is deductible for your specific circumstances.
- If possible, purchase these items prior to 30 June so that you are able to legitimately deduct the expense from your taxable income for 2024.
-
-
Deductible (concessional) superannuation contributions:
Consider making extra deductible superannuation contributions. The reason for increasing superannuation contributions is twofold:-
- In general you will pay a 15% contributions tax which is likely to be lower than your marginal rate of taxation as shown in the above table.
- Your future earnings will be subject to concessional rates of income tax and capital gains tax. These benefits increase after retirement.
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Non-deductible (non-concessional) superannuation contributions:
These are superannuation contributions where you do not receive a tax deduction; nor do you pay contributions tax. It applies to specific situations such as “house downsizers” and the “bring-forward” rule and is quite technical.
Note: To ensure that your benefits are optimised, if you elect to make any superannuation contributions you should seek professional advice
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Income deferral until the next financial year:
Where possible, it makes sense to defer any income until the next financial year. This is even more important for the current financial year because the income tax rates will be lower in 2025.
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