2024 TAX PLANNING TIPS!

As we approach the end of the financial year, it’s time to start preparing. We’ve put together some important tax planning concepts that could help you navigate the 2023-24 financial year. We’ve also included some upcoming tax and super changes that will start from 1st July 2024.

Superannuation- Minimum annual pension payments

From 1st July 2023, the temporary measure that allowed a 50% reduction in the minimum pension draw down calculation has been discontinued. The minimum annual payment amount is determined by multiplying the member’s pension account balance by a percentage factor, without any further 50% reduction. Make sure to meet your minimum annual payments by 30th June 2024 to avoid any undesired tax consequences.

Deductions for Super

Superannuation can be claimed in the year paid, so if you want the tax deduction for this financial year then it must be paid and received by the super funds by the 30th of June 2024.

Depreciation Changes for Small Businesses

Under the simplified depreciation rules, small businesses with an aggregated turnover of less than $10 million are qualified to immediately deduct eligible assets costing less than $20,000*. These eligible depreciating assets must be held and ready for use from 1st July 2023 to 30th June 2024.

For assets costing $20,000 or more, they can be allocated to the small business pool and depreciated at 15% for the first income year, and at 30% each year thereafter. If you are to utilise the small business pool, then all assets owned must be depreciated under the rules of the small business pool. 

*Please note the instant asset write-off threshold of $20,000 is not yet law and is currently before Parliament at the time of writing.

Tax Deductions

Here are some basic guidelines for your tax deductions in the 2023-24 financial year.

  • Cents-per-kilometre method – If you’re using this method to claim your car expenses, the set rate for 2023-24 is 85 cents per kilometre, with a maximum claim of 5,000kilometres per car, for the year. This rate covers all your work-related car expenses such as fuel, insurance, registration, depreciation, servicing and maintenance. You cannot claim these costs separately if you are using the cents-per-kilometre method.

  • Car cost limit – For business owners, the car limit has increased to $68,108 for the 2024 income year. This limit indicates the maximum amount you can use in calculating the depreciation of passenger vehicles used for business purposes. A passenger vehicle, for this purpose, is designed to carry a load of less than one tonne and fewer than nine passengers and excludes motorcycles or similar vehicles. If you are a GST registered business, the maximum GST credit you can claim is up to one-eleventh of the car limit ($6,191.63).

  • Work from home expenses – fixed rate method – To claim eligible expenses you incur from operating your business at home, you can use the fixed rate method and claim at the current rate of 67 cents per hour. This rate covers work-related running expenses such as phone and internet usage, electricity and gas, stationery, and computer consumables like printer ink and paper.

Please note you can still claim a separate deduction for the decline in value of depreciating assets such as your laptop, printer, office desk and chair.

Remember to keep records of the actual hours worked during the income year and at least one record for each of the additional running expenses you incur to claim your work from home deductions under this method.

Please remember that you can only claim the work-related portion of these expenses.

Individual tax rate changes from 1 July 2024

The following table outlines the key changes to individual tax rates effective 1st July 2024.

A summary of changes from the 2023/24 tax rates are as follows:

  • The 19% tax rate will be reduced to 16%;

  • The 32.5% tax rate will be reduced to 30% for incomes between$45,000 and a new $135,000 threshold;

  • The threshold at which the 37% tax rate applies will increase from$120,000 to $135,000; and

  • The threshold at which the 45% tax rate applies will increase from $180,000 to $190,000.

These rates do not include the Medicare levy. These changes can potentially provide tax benefits. For instance, you might consider deferring income to the next financial year or bringing forward eligible tax deductions into the current year to take advantage of the lower tax rates post 30th June 2024.

To illustrate these upcoming changes, if you have a 2023/24 taxable income of $100,000, the basic tax payable under the current rates is $22,967. In the 2024/25 financial year the basic tax payable is $20,788 resulting in a tax benefit from the new rates of $2,179.

Super contributions caps increase from 1st July 2024

Key changes to super contributions which will take effect on 1st July 2024 are as follows:

  • The concessional contributions cap will increase from $27,500 to $30,000

  • The non-concessional contributions cap (which is 4x the concessional contribution cap) will increase from $110,000 to$120,000. Consequently, the three-year bring forward rule limit will increase from $330,000 to $360,000. Please note the ‘bring forward’ must be triggered on or after 1stJuly 2024.

If eligible, you can still utilise any unused concessional contributions and these can be carried forward for up to five years. If you have unused concessional contributions from the 2019 income year, these must be used by the 2024 income year.

As always, if you have any questions about any of the above, please don't hesitate to contact our office to discuss on 08 8523 0999 (Gawler Office), 08 8299 9444 (Northgate Office) or admin@milaneseco.com.au.

Milanese & Co Accountants