Tax planning for individuals…

Tax planning helps you legitimately plan your affairs to ensure you don’t lose wealth to taxation.

In this first of two articles, we address tax planning for individuals. In the next article we explain tax planning for businesses.

Deferral of income

Prima facie, deferring your income until a later tax year makes sense because you can hold your money for longer. You could also put it against your mortgage to accrue less interest, but it’s not a straight-forward process.

You must take into account your expected future income level. For example, if you have lower income this year than you expect to have in future years, you may not benefit from deferring your income. Conversely, if you expect to have lower income in future (e.g. you intend to leave the workforce) deferring income becomes a good idea.

How to defer income

So, how do you defer income? In simple terms it can be anything from choosing to defer the sale of assets that lead to the realisation of a taxable capital gain, to setting term deposits to mature in the next financial year.

You must take into account any changes to tax rates and levies. Deferring income this year will result in that income being taxable at next year’s (or a later year) rates. Where the tax rates are decreasing in the following year you can get a benefit by deferring.

Bring expenses forward

A similar outcome is achieved by bringing forward your expenses. If you are planning to spend money in the short term, consider spending that money before 30 June, especially if your income is higher this year than what you think it will be in future. This makes even more sense in a year where the current tax rates are higher than they will be next year.

For example, you can make donations to deductible gift recipients (charities) or carry out repairs and maintenance on an investment property. You may also qualify for deductions for interest that is prepaid (subject to the terms of the finance agreement).

Capital gains and losses

Another way to influence your taxable income between now and 30 June is to manage your capital gains and losses. Consider reviewing your other investments and realising capital losses that can offset any gains, if you’ve also realised a capital gain in the current financial year.

Alternatively, if you incurred a capital loss or have carried forward capital losses available, you may consider crystallising a capital gain, particularly if you expect your income to increase over time. Although note, you can carry forward losses to later years, so there is generally no real urgency about realising a gain just to use losses.

Making superannuation contributions

Subject to a number of rules, individual taxpayers may qualify for a deduction in respect of personal superannuation contributions up to the concessional contribution limits. The limits are currently $27,500 increasing to $30,000 in 2025. Personal contributions are only deductible if the following conditions are satisfied:

  • The contribution is paid into a complying superannuation fund; and
  • Your fund has sent you an acknowledgment; and
  • You meet the age restrictions; and
  • You have given your fund a notice of intent to claim in the approved format.

Always consult your accountant for advice about tax planning, but make sure you do it well before 30 June or you’ll miss the end of financial year deadline.

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