Many Australian taxpayers leave their tax planning until the end of the financial year and, as a consequence, miss out on utilising tax strategies that affect their bottom line.
Peter Bembrick, tax partner at HLB Mann Judd Sydney, suggests investors should start preparing now for 2019-20 in order to gain the maximum tax benefit.
“The current financial year is when people really need to start thinking about their tax obligations and what they can do to minimise any tax incurred,” said Mr Bembrick.
HLB Mann Judd Sydney warns that taxpayers are confused with tax deductible expenses, with the Australian Tax Office maintaining a strong focus on the type and amount of expenses claimed.
“The $300 limit for claiming work-related expenses without receipts continues to be misunderstood, yet it’s such a key area of focus for the ATO,” Mr Bembrick said.
“It doesn’t mean an automatic deduction of $300. Taxpayers must still spend the money and detail the amounts and nature of the expenses. It just means you don’t need the receipts,” said Mr Bembrick.
Taxpayers are reminded that in the event of an audit, they may need to substantiate their claims.
With that in mind, Mr Bembrick believes taxpayers need to be prudent and carefully approach in the lead up, during and after the start of a new financial year.
“Tax and superannuation, in particular, are two areas of policy that generate a consistently high level of legislative change, so planning now only ensures a maximum refund, but also helps to ensure any new policy changes are adequately addressed,” said Mr Bembrick.
Recommendations for individuals
Mr Bembrick believes the best strategy before 30 June is as follows:
- Bring forward and maximise tax-deductible expenses: Deductible expenses can generally be prepaid for up to 12 months and claimed upfront.
- Take advantage of superannuation rules: Superannuation changes effective from 1 July 2017 means PAYG (pay as you go) earners can now claim tax deductions for their personal superannuation.
- Income splitting: Couples where one partner makes significantly more should take advantage of the lower-earning spouse to minimise tax.
- Private health insurance: Medicare levy surcharge applies for singles earning over $90,000 and couples earning $180,000. Take out private health insurance to minimise this levy.
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