9 tax planning strategies for individuals in 2024

As we near the end of another financial year, it is important to start thinking about strategies that can be implemented to reduce taxable income for the year ended 30 June 2024.

Here are 9 tax planning strategies that may be considered prior to 30 June 2024:

1. Defer income

With tax planning, even implementing strategies to simply defer income to the following financial year can provide significant benefits and should be considered. This is especially so given the tax cuts that will occur from 1 July 2024.

A good example would be deferring a taxable Capital Gains Tax event on an investment until after 30 June 2024.

2. Prepay expenses

Individual taxpayers not operating a business are able to claim a tax deduction for prepayments made for an advance period of up to 12 months after the end of the financial year.  

Making prepayments accelerates the timing of the tax deduction that would otherwise be ordinarily claimable in the following financial year.

A common example of a prepayment strategy would be to prepay interest on a borrowing facility.

3. Accelerate deductions

Individual taxpayers generally claim tax deductions on a cash paid basis. Deductions can be accelerated for example by purchasing home office consumables by 30 June 2024, by making donations by 30 June 2024, or by paying expenses associated with investment assets by 30 June 2024.

4. Maximising home office deductions

Many taxpayers are still regularly working from home. In relation to work from home expenses, taxpayers can choose to claim deductions based on a reasonable portion of actual costs incurred in relation to their home office (such as depreciation of furniture and equipment items, stationary, and a portion of cost of utility expenses) OR can claim a fixed rate 67 cents per hour deduction based on a record of hours worked from home.

5. Maximising superannuation contributions

For the 2024 financial year, an individual taxpayer can make deductible concessional contributions (inclusive of employer contributions already made on their behalf) of up to $27,500. If the taxpayer has not already fully utilised the $27,500 threshold, the taxpayer should consider making additional concessional contributions to claim an additional tax deduction for the 2024 financial year.

6. Making catch-up superannuation contributions (if you are eligible to)

For taxpayers with a superannuation balance of under $500,000, additional concessional contributions beyond their $27,500 concessional contribution cap can be made in the 2024 financial year if they did not fully utilise their available concessional contribution caps in prior years commencing from the 2020 financial year. For example, a taxpayer that has only made concessional contributions of $15,000 in each of the 2020 and 2021 financial years could potentially use this concessional to make a further deductible superannuation contribution of $20,000 in the 2024 financial year.

7. Rental property deductions

For individuals who own investment properties, they should consider obtaining a Quantity Surveyor report to maximise depreciation and capital works deduction claims for commercial properties and new residential properties that they have purchased during the year or in a prior year.

WARNING: The ATO have identified rental property deductions as a focus area in 2024. Individuals should ensure that all deduction claims on rental properties (including depreciation claims) are fully substantiated.

8. Trust distribution strategies for the 2024 financial year

If you have a trust, please note it is a requirement of the ATO that trusts resolve how they will distribute their trust income for the 2024 financial year prior to 30 June 2024. Most commonly, this is done by the trust making a trust distribution resolution.

In determining how a trust distributes its income in the 2024 financial year, it is important to consider:

  • The ATO has previously issued a tax ruling which considers situations where a trust distributes income to a beneficiary, but the financial benefit of the distribution is directed to another person. In determining trust distributions for the 2024 financial year, regard needs to be had to this ruling.
  • Where the income of the trust represents personal exertion income of one person, the income should be distributed to that person.
  • In relation to trusts that receive income from professional services businesses, the ATO has issued guidelines in relation to the quantum of income that is required to be distributed to the professional practitioner of the professional practice.  This may impact on how the trust distributes its income for the financial year.

9. Consider realising loss making investments

If capital gains have been realised in the 2024 financial year, consider realising investments with unrealised capital losses to offset the capital gain.

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