Taxation in 2024: A Guide to Organising Your Finances in the New Year


Taxation in 2024: A Guide to Organising Your Finances in the New Year

A New Year calls for organization! As we embark on another journey around the sun, it’s time to turn our attention to a crucial aspect of our financial lives—organizing our taxes. In Australia, a well-organized tax strategy not only ensures compliance with the Australian Taxation Office (ATO) but also helps you make the most of potential deductions and credits. In this blog post, we’ll walk you through essential steps to get your tax affairs in order so you can start your new year fresh and ready to tackle your financial goals.

Create a Tax Hub

Start by establishing a designated space for all your tax-related documents. Whether it’s a physical folder or a digital folder on your computer, having a centralized location will make it easier to keep track of important paperwork throughout the year.

Gather Income Documents

Collect all income-related documents, including your Payment Summaries (formerly known as group certificates), investment statements, and any other documents reflecting your earnings. Organize them by category to simplify the reporting process when it’s time to file your tax return.

Check for Changes in Tax Laws

Stay informed about any changes in Australian tax laws that may affect your tax situation. The ATO regularly updates its guidelines, so it’s crucial to be aware of any new regulations or deductions that could impact your tax planning. When seeking advice, it’s best to consult a professional who can give you accurate and up-to-date information. Impact Taxation & Financial Services can offer professional advice.

Review Deductible Expenses

Keep a record of deductible expenses, such as work-related expenses, charitable donations, and self-education expenses. Ensure you have the necessary receipts and supporting documentation for each deduction to claim them accurately.

Evaluate Superannuation Contributions

Review your superannuation contributions for the previous year and consider making additional contributions if eligible. Maximizing your super contributions can have long-term benefits and may provide tax advantages.

Understand Tax Offsets and Credits

Familiarize yourself with available tax offsets and credits, such as the Low- and Middle-Income Tax Offset (LMITO) or the Seniors and Pensioners Tax Offset. Understanding these can help you optimize your tax position and potentially receive additional refunds.

Explore Small Business Deductions

If you’re a small business owner, be aware of the deductions available to you. This may include expenses related to running your business, home office deductions, and depreciation of business assets.

Utilize Online Tools and Resources

Take advantage of online tools provided by the ATO, such as the myTax portal and the ATO app. These resources can simplify the tax filing process and provide real-time information about your tax situation.

Set Reminders for Key Dates

Mark important dates on your calendar, including the lodgment due date for your tax return and any other relevant deadlines. Setting reminders will help you stay on top of your tax responsibilities and avoid any late penalties.

Organizing your taxes in Australia doesn’t have to be a daunting task, especially if you have the help of your tax accountant to guide you through the process. By creating a dedicated tax hub, staying informed about tax law changes, and diligently tracking income and expenses, you’ll be well-prepared for a smooth tax season. Remember to leverage online resources, explore potential deductions, and seek professional advice if needed. With a proactive approach, you’ll be better organized, allowing you to make the most of your financial opportunities in the new year.


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10 things you should consider before buying a property

Are you considering buying a property? Do you know you could miss opportunities to save thousands, or tens of thousands of dollars if you don’t plan well before the purchase?

Below are a few key considerations:

1. How should you set up your loan structure? If you don’t have a loan offset account for a rental property, after you make extra payments directly to the loan account, you can only claim interest deduction on the remaining balance of the loan. For tax purposes, this deductible balance can’t be changed even if you redraw the overpaid amount later. A good loan structure could also help you to stabilize interest rate and speed up loan repayment by combining a standard variable loan (with an offset account) and a fix rates account.

2. Timing of renovation. You might want to do a renovation right after you have bought the rental property. But do you know for any genuine repair & maintenance included in the renovation, you can claim an outright deduction against the rental income when the property is available for rental? If the work is done before the date when the property is available for rental, you can only claim the deduction against future capital gain when the property is sold. Depend on when you are going to sell, it could take years or up to decades before you can claim the deduction.

3. How should you split ownership? You might want to share the property ownership with a family member. For tax purposes, the percentage of ownership is based on the legal title, regardless of who is paying more on the mortgage. If the property will give you a tax profit, you might want to allocate more
ownership to the low-income earner to utilize the lower marginal tax rate. If it is giving you a tax loss, you might want to allocate more ownership to the high-income earner to utilize the loss. The goal is for the family to pay minimum tax together.

4. Should you use a family trust to purchase the property? There are many pros and cons related to a family trust. The advantages include tax savings on rental profit or capital gain, asset protection and succession planning on family wealth. However, family trust can’t distribute losses. All losses are trapped in the trust to be used to offset future trust profit. Therefore, you can’t utilize any rental loss in a trust to offset other income such as salary & wages. Family trusts also attract high accounting fees on initial setup and annual fees on financial statements and tax returns. State governments also charge much higher land tax on family trusts.

5. Will the income level change in future years for different owners? You might want to forecast the possible income for different owners to understand total tax payment / savings related to the property. This could also impact on your decision making on point 3 and 4 above.

6. Understand when you can treat your property as main residence to receive an exemption on capital gains tax. When eligible, even if you have received rental income, you could still treat your rental property as main residence and receive the exemption. To be eligible, you will need to treat it as your main residence at the beginning. Please check out this ATO link: Treating former home as main residence.

7. Decide whether you need to purchase a depreciation report. Most taxpayers don’t know that the depreciation on the building will need to be added back to calculate capital gains tax when the property is sold. When the property is held for more than 12 months, after applying the capital gains tax discount of 50%, it will effectively cut the tax rate by half at the time of sales. This makes depreciation deductions desirable for high income earners. However, for low-income earners it might not be ideal to claim depreciation as a rental deduction since they could be paying more on capital gains tax in the future. It could get more complicated if the property is under joint ownership between high and low income earners.

8. You might want to consider Centrelink payments for future or existing owners. Most Centrelink payments are income and asset tested. Before attaching a rental property to a family member who is receiving, or plan to receive government benefits, you might want to check the testing thresholds first to see if the Centrelink payment will be impacted. This is also applicable when you are making distributions from a family trust to different family members.

9. Have you considered using your SMSF (selfmanaged super fund) to make the purchase of a rental property? There are a lot of tax saving opportunities with a SMSF since the income tax rate is only 15%. And the capital gains tax rate is effectively only 10% after factoring in the 1/3 discount. The major downside with a SMSF is normally you can’t get the money out until you retire or on compassionate grounds (SMSF does have more flexibilities compared to normal retail super fund. But the choices are still very limited). It could be expensive to set up and operate a SMSF too. There are also strict legal requirements on the trustees. Penalties on incompliance could be severe. Tax law around SMSF is very complicated too. You will need to find a good tax accountant specialized in SMSF to help you to understand the structure, also do a cost-benefit analysis before setting it up.

10. Consider internal ownership changes. For your existing rental properties, you can also consider whether you should transfer the ownership between family members, or between different business structures (this is not applicable for SMSF). You might want to do this when the income level changes with family members, or rental property changes between tax profit and loss. Before the change, you need to consider the cost of transfer including capital gains tax, stamp duty, conveyancer fees, etc. Again, a cost-benefit analysis is a must before the change.

Last but not the least, did you combine all the above strategies and compare your choices? If you haven’t yet, how would you know that you have picked the best strategy to minimize your taxes? We can help you to factor in all considerations, compare different scenarios, also present you with a Property Prepurchase Report with all our findings to help you to make a decision. Contact us today to book in a consultation with an experienced tax accountant!

This is general advice only and does not consider your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your accountant.

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