More Tax Planning Strategies prior to 30 June 2013 With only a few weeks left to the end of financial year, now is a perfect time to review your 2013 tax position and consider strategies that may require implementation before year end. Whether you are an employee or in business, you may find the following strategies useful. Superannuation Superannuation still provides an effective way to reduce your tax liability, despite the Government’s recent announcements. Until 30 June 2013, the concessional (i.e. tax deductible) superannuation contribution cap for all individuals is $25,000. If you are in business or pass the “10% test”, that is, less than 10% of your annual income is derived from employment, you may be entitled to a tax deduction by making concessional superannuation contributions, a potential tax saving of up to 31.5%! Employees can also obtain a “tax deduction” for superannuation by entering into an effective salary sacrifice arrangement with their employer, for example, by salary sacrificing their year end bonus and saving up to 31.5%. Note however that breaches of the $25,000 concessional cap may attract additional tax. Prepayments If you are a “small business entity”, that is, your annual turnover is less than $2 million, or an investor (e.g. rental property owner or share investor), you may be eligible to prepay expenses such as interest, where the expense covers a period of less than 12 months. The benefit of prepaying expenses is that you bring forward the 2013/14 tax deduction into the 2012/13 year. However, you must bear in mind that the deduction will not be available in the 2013/14 year unless you again prepay the expense for the 2014/15 year and so on. Medical Tax Offset From 1 July 2012, the medical expenses tax offset became means tested, calculated as follows: Singles Couples/Families Income ($) Threshold Tax Offset Income ($) Threshold Tax Offset 0 – 84,000 2,120 20% 0 – 168,000 2,120 20% 84,001+ 5,000 10% 168,000+ 5,000 10% Singles earning over $84,000 and couples/families earning over $168,000 will have to incur out-of-pocket medical costs of $5,000 (up from $2,060) before they can claim the tax offset of 10% (down from 20%). Therefore, you should review your family’s medical expenses for the financial year, including the cost of prescription medication and if appropriate, consider any routine medical examinations prior to 30 June 2013 (e.g. dental and optical). Other There are many other tax planning opportunities to consider, such as and not limited to: Bringing forward tax deductions. Deferring income into the next financial year. Disposing of underperforming assets to offset any capital gains made earlier in the financial year. Undertaking a general review of your tax structure and winding up redundant entities or establishing new entities before 30 June. Consider superannuation re-contribution strategies. If you would like further information on how to reduce your year end taxes, we recommend that you contact East Coast Accountancy Management Services partner by email below: [email protected] or [email protected]
Posted on: Wed, 19 Jun 2013 00:42:46 +0000
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