General concepts of tax planning involve:

  • Delaying the derivation of income – you might not deposit income if on a cash basis, or delay invoicing customers until 1 July if on an accruals basis, of recognising the derivation of income;
  • Bringing forward deductible expenses or losses – consider buying items a little earlier than needed or consider realising a capital loss so that it may be applied to current year gains;
  • Prepayment of next year’s expenses – small business and individuals may prepay services which will be provided within the next 12 months;
  • Use up lower marginal tax rates –consider investments in joint names or in a lower income earner’s name if the tax rate is lower;
  •  Maximising deductions – keep track of tax related expenses by reviewing credit card statements and collating invoices consistently during the year so a once a year review obtains all your deductions;
  •  Paying super before year end. Super must be physically paid to and received by the fund in order to be tax deductible; 
  • Maximising rebates and tax concessions – note concessional superannuation contribution limits (up to $30,000 if less than 55, up to $35,000 if aged between 55 and 75 – subject to being an eligible person able to contribute to super and the work test if aged 65 or over), the spouse super contribution rebate which may be available for a contribution made to a low income earning spouse who is less than 75 and net medical rebates for medical aids and nursing home fees (provided it was claimed the previous tax year).

Naturally there are trade-offs between saving some tax and locking money away (eg. deductible super contributions) and stretching cash flow (eg. prepaying expenses). Importantly a tax deduction has a value reflective of your marginal tax rate, so a deduction of $1 for a taxpayer on with a marginal tax rate of 34.5% saves them only 34.5c of tax otherwise payable. Accordingly you are wasting money if you buy unnecessary items.

Please contact our office with any accounting or taxation questions. 

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2017 Federal Budget Tax issues & Tax Planning

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