2017/18 Tax Planning – Individual
For tax purposes, subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June. Also consider putting these in the name of the lower income earner.
Capital Gains & Losses
To maximise the tax on capital gains consider realising capital losses if you have already realised capital gains on other assets during 2017/18. This is only from a tax point of view and should discuss with your financial planner to consider whether this is appropriate.
- Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2018/19 compared to 2017/18 – discuss with your financial planner.
- If you expect lower income in 2018/19 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket.
Donations over $2 are claimable as a tax deduction provided you have supporting documentation (such as a receipt) and it is paid to a Deductible Gift Recipient (DGR). Most well-known charities are DGR’s. Arrange for deductible donations to be grouped in the higher income year, if you are expecting substantially higher or lower income in 2018/19 compared to 2017/18. Make all donations in the name of the higher income earner.
Income producing (negatively geared) assets
If you plan to purchase income-producing assets, consider acquiring assets that will generate positive cash flow in the name of the lower income earner. Conversely, consider acquiring negatively geared assets in the name of the higher income earner.
The minimum income threshold for HECS-HELP debt repayments will reduce from 1 July 2018. From this date HECS-HELP repayments will be required when an individual’s taxable income is greater than $42,000. The initial repayment rate is 1% of income and increases to 10% for taxpayers earning more than $120,000.
Self-Education & Training
The cost of furthering your education and training will be tax deductible provided that it is related to your current employment activity. Courses subsidised by HECS-HELP will generally not be deductible; but other costs associated with studying such as text books, equipment, parking, and travel will be deductible.
Expenses are deductible when they are incurred. For an individual this is when the expense is paid, therefore if practicable pay for deductible expenses prior to 30 June. This includes insurance and interest on rental properties.
Income Protection Insurance
Consider paying any income protection insurance up front prior to 30 June to ensure the deduction is claimable this year.
If you use a home office for ‘income producing activities’ you may be able to claim a proportion of some expenses as a tax deduction (e.g. telephone, electricity, gas). To be eligible to claim the deduction, you must keep entries for a representative period to indicate the hours you spend in the home office.
A deduction is also available for work related telephone calls. Some common examples of supporting documents include:
- Identification from an itemised telephone account; or
- Diary entries.
To claim your personal tax deductions, ensure you are able to substantiate your expenses:
- Claims exceeding $300 must be supported by written evidence for the entire amount, not just the amount over $300.
- The $300 limit does not include award transport payments or car, meal or travel allowance expenses.
- For expenses of $10 or less, provided they do not exceed $200 in total, require written evidence detailing the same information as on a receipt (in a diary for example) where you cannot obtain a receipt.
- We still recommend you obtain substantiation for expense claims less than $300.
Small Business Entities (SBE)
Individual taxpayers who are Small Business Entities (SBE) are now entitled to a 8% discount on the income tax payable on any SBE income received (other than a company), up to a maximum of $1,000 a year.
SBE can claim a tax deduction for depreciable assets they purchase for their business provided they cost less than $20,000 each.
Under the current legislation, the $20,000 instant asset write-off threshold has been extended to 30 June 2018. If you are planning major purchases or replacements of capital equipment, you should contact us for specific advice as soon as possible.