Tax Planning for Individuals and Families: 5 Tips and Tricks for Year Long Joy
We cannot believe that it’s that time of year again! June 30 always comes around so quickly, so with the end of financial year fast approaching we have compiled our EOFY tax planning tips, tricks and traps.
We realise tax planning isn’t the most exciting of subjects – but it is important to ensure you reduce your tax exposure and maximise the opportunities available to you.
This article is for individuals and families. Check out our small business Tax Planning article.
5 Tax Tips
1. PRE-PAY EXPENSES BEFORE JUNE 30.
To minimise your tax this year, is there anything that can be bought or pre-paid prior June 30? A good example of this is home office equipment up to $300 such as a printer or monitor. Another example might be to prepay a 12 month subscription for your favourite work journal or magazine.
For those with rental properties, look at paying your council rates, strata or water before June 30 to ensure it is deductible in the 2015/2016 tax return. Perhaps contact your bank to see if you are able to prepay 12 months of interest. Make sure you also check out our article on what you can and cannot claim for your rental property.
2. MAKE A SUPER CONTRIBUTION ON BEHALF OF YOUR SPOUSE.
If your partner earns less than $10,800, or up to $13,800 per year, consider making a superannuation contribution into their fund to receive a rebate of up to $540.
3. SALARY SACRIFICE A BONUS INTO YOUR SUPERANNUATION.
If you’re going to receive an EOFY bonus, consider salary sacrificing this as a super contribution instead to keep your income lower (and pay less tax). Ensure you check your contribution balance and cap for the year before you do this, to ensure you don’t exceed your contribution cap (and end up paying more tax).
4. GO PAPERLESS.
Download the free ATO myDeductions App. myDeductions makes it easier and more convenient for you to keep your individual income tax-related deductions all in one place, and you can share it with us next year when it comes to prepare your return.
5. MAKE CONTRIBUTION TO SUPER AND THE GOVERNMENT WILL MATCH IT.
If you earn between $35,454 and $50,454 consider contributing a further $1,000 into your super fund as the government will match your contributions up to a maximum of $500. Again, check your contribution cap limits.
What’s Changing In 2016/2017?
OUT OF POCKET MEDICAL EXPENSES CLAIMS PHASED OUT.
The medical expenses tax offset, the offset that allowed you to claim out of pocket medical expenses beyond what Medicare covered, has been phased out. From the 2015-16 year onwards you will only be able to claim the offset for medical expenses that relate to disability aids, attendant care or aged care services until the offset is completely removed from 1 July 2019.
NO MORE AVOIDING YOUR STUDENT LOANS…
From 2016-17, people with a Higher Education Loan Programme (HELP) who live overseas for 6 months or more need to make repayments of their HELP debt. Essentially, HECS repayments will be calculated on the same scale as if you were living and earning an income in Australia.
CHANGES FOR FAMILIES:
- Large family tax supplement axed
From 1 July 2016, the Large Family Supplement of Family Tax Benefit Part A has been abolished. Families will continue to receive a per child rate of FTB Part A for each eligible child in their family.
- Benefits cut for those outside of Australia
From 1 January 2016, families will only be able to receive Family Tax Benefit A for 6 weeks in a 12 month period while they are overseas. Previously, FTB A recipients who are overseas were able to receive their usual rate of payment for 6 weeks and then the base rate for a further 50 weeks.
- No jab no pay
From 1 January 2016, families are no longer eligible for subsidised child care or the Family Tax Benefit Part A end of year supplement unless their child is up to date with all childhood immunisations.
Tax Traps To Be Aware Of:
CHARITABLE GIVING – WHAT CAN YOU CLAIM?
That cricket bat signed by Steve Waugh or the weekend away you bought at charitable auctions might not necessarily be tax deductible. For tax purposes, if you receive anything for the ‘donation,’ like a teddy bear, biscuits, or an auction item, etc., then it may not be tax deductible because you have purchased something rather than made a genuine donation.
There are some special rules that can allow a deduction for part of the price you have paid for an item at a charity auction, but we will need to check this to see whether you can claim a deduction at all and if so, how much you can claim. Get in touch if you’re unsure.
Tax deductions are only available for donations made to deductible gift recipients (DGRs).
The charities that offer giving programs where you send a child to school, buy a goat, or fund mosquito nets are popular charity ‘gifts’ and are deductible (as long as the charity receiving the donation is a DGR) as you are not actually donating that item but the equivalent amount of money to be used by the charity for that purpose.
ARE YOU AN UBER DRIVER OR DO YOU RENT OUT YOUR HOME ON AIRBNB?
If you earn income from the ‘sharing economy’, that is from AirBNB or Uber-like ride sourcing services such as letting a room, doing odd jobs, or driving passengers in a car for hire, anything you earn is assessable income and needs to be declared in your tax return.
Earning income from these services may also impact on you in other areas of the tax law. For example, if you rent out a room in your home (your main residence) through say AirBNB or a similar service, you might lose your entitlement to the full main residence exemption on the sale of the property in the future.
For drivers involved in ride-sourcing services such as Uber, the ATO has confirmed that it considers this a taxi service. This definition is bad news for anyone involved as it means that not only is the income you earn assessable, but it also means that GST applies to fares from the first dollar that the driver earns. Affected taxpayers were given until 1 August 2015 to obtain an ABN, register for GST and start complying with their GST obligations.
The good news is that this can be back dated – get in touch with us to get this sorted for you asap.
ARE YOU PLANNING ON SELLING AN AUSTRALIAN PROPERTY WORTH $2 MILLION DOLLARS OR MORE?
New rules to prevent foreign residents avoiding tax when they sell Australian property will affect everyone buying or selling property with a market value of $2 million or more from 1 July 2016. From 1 July, a 10% withholding tax will apply when foreign residents sell certain types of Australian property.
The Budget and Super –
What Should You Be Doing Now?
Many clients have asked, ‘should we be doing anything now about the Budget’s superannuation announcements?’.
The main announcement to be mindful of now is the $500,000 lifetime cap on non-concessional contributions as what you do now may have a lasting and potentially detrimental impact.
Under the current rules, you can use the ‘bring forward rule’ and contribute up to $540,000 across a 3 year period to your super fund. Anyone utilising these rules in the current year may find that the proposed rules, if they come into effect, will radically change their position.
While this change to concessional contributions is dependent on the Government winning the election and subject to the legislation passing Parliament, it’s really important that anyone contemplating making large contributions to super or utilising the bring forward rule, get advice first.
Concessional and non-concessional superannuation
The concessional contributions cap (pre-tax employer and salary sacrificed contributions) remains at $30,000 unless you are 49 or over on 30 June 2016, in which case it is $35,000. The non-concessional contributions cap (contributions you make where you don’t claim a tax deduction) remains at $180,000.
Supplying Your 2016 Information.
We will shortly be sending you your 2016 tax questionnaire that will ask you to provide all the data we need to complete your return. Keep a look out for this email, and get in touch if you have any questions in meantime on 02 9314 2025 or firstname.lastname@example.org