Preparing for the 2014 End of Financial Year

Preparing for the 2014 End of Financial YearAs the end of the financial year approaches, there is always the temptation to leave your tax return until the last minute. This year, commit to starting early so that you will have plenty of time to prepare your return and look into how you can take advantage of the tax breaks that you are eligible for. These strategies could help you minimise your tax bill this financial year.

1. Individuals and superannuation

There are many ways you could potentially reduce your tax bill or maximise your returns. Explore your options relating to super, work expenses, medical costs and insurance. Keep in mind that timing is essential.

  • Superannuation contributions – Consider making additional superannuation contributions over and above what is already deducted from your salary. If you areeligible, the government will match your contributions with co-contributions up to $500.
  • Spouse contributions - You could claim anoffset of up to $540 if you made super contributions on behalf of your spouse, who must have earned less than $13,800 in the financial year.
  • Salary sacrifice - Check with your employer about salary sacrificing into super. Any extra payments to your super fund from your pre-tax salary is taxed at 15% rather than your marginal tax rate.
  • Insurance – Expenses incurred in earning income – such as income protection insurance – may be tax deductible for you. You can make prepayments on premiums to maximise your tax deduction.
  • Work-related and investment expenses – Work-related expenses such as payment for uniforms, training classes and study materials could be deductible. Other income-related costs such as investment expenses (payment for financial advice, management fees, and account-keeping fees) may also be tax deductible.
  • Capital gains – If you have had a capital gains event in the current financial year, check whether you can claim any losses to minimise tax.
  • Rebates – Review your eligibility for deductions such as the childcare, low-income, mature-age-worker and dependent spouse rebates.

2. Small Business

Small businesses (those with aggregated turnover of less than $2 million) can optimise their tax returns by bringing expenses forward and writing off any obsolete assets.

  • Expenses - Purchase items that you need before rather than after the end of the financial year so that you can claim deductions in the present year. However, if you are expecting a larger profit next year you might want to delay major purchases and claim the deductions for these against your business income in next year.
  • Write-offs and stocktake – Conduct a stocktake to ascertain the true value of stock and write off obsolete stock. New assets purchased for up to $6,500 can be instantly written off rather than having to be depreciated over time.
  • Depreciation – Check assets and apply the correct depreciation rates. For example, motor vehicles attract an accelerated initial depreciation rate while many assets can be pooled in the general small business pool for a 30% depreciation rate.
  • Repay loans - Repayments for loans with a service period of 12 months or less can be claimed as an immediate deduction.
  • Super contributions and bonuses - Pay super contributions and bonuses before June 30 so that you can claim for these deductions in the current year.

3. Property Investors

If you are one of the many Australians who own an investment property, there are a few extra strategies to keep in mind for reducing your tax bill. Your property ownership structure, salary and income from other assets will impact the effectiveness of any of these strategies.

  • Expenses - Bring expenses forward and make advance payments where possible. Ongoing costs such as insurance, pest control and repairs can be prepaid and the deductions claimed in the current year.
  • Depreciation – Depreciation in assets such as hot-water systems, air-conditioning systems, stoves and fridges may be claimed.
  • Borrowing costs – Prepay the coming year’s interest payments if you expect lower income in the next financial year.