With change to the personal tax rates coming in on 1 July 2024, individuals and family groups should be reviewing their tax planning strategies now.

The incoming tax changes mean that all taxpayers will be paying less tax next year than they are paying this year, assuming the same amount of taxable income. Therefore, it makes sense to bring forward any deductions and apply them to this year’s higher tax rate and push back any income into next financial year if possible.

Tax deducible expenses

Bring forward and maximise tax-deductible expenses – pay any tax-deductible expenses now if possible.

Buy any items before 30 June to maximise the impact on your tax. Deductions could include new home office furniture or technology, subscriptions or memberships, income protection insurance, professional development courses, charitable donations or rental property expenses.

A reminder, some expenses can often be pre-paid for up to 12 months and claimed up-front.

Capital gains tax

If any assets have been sold during the year (such as an investment property, shares or sale of business), take steps before 30 June to work out how much capital gain has been made and what can be done to reduce the tax impact on that gain.

This could include realising capital losses on other assets by 30 June, delaying the disposal of other assets by a few days, or making more significant contributions to superannuation.

For a business sale, there may be some generous CGT concessions available if certain conditions are met.

Take advantage of income splitting

Couples should consider making investments in the name of the lower-earning spouse to minimise the tax payable on income distributions and capital gains.

Alternatively, families may opt for a discretionary trust or, in certain cases, an appropriately structured investment company as their primary investment vehicle. These options offer maximum flexibility and allow distributions to lower-income family members.

However, it’s crucial to note recent ATO guidelines stress the importance of ensuring that family members genuinely benefit from trust income allocated to them.

Payments or loans from private companies

Where family members or related trusts have received payments or loans from a private company, ensure that appropriate action has been taken to comply with the deemed dividend rules in Division 7A of the tax legislation.

This may include ensuring that a loan has been repaid in full by the required date, entering into a complying loan agreement or (for prior year loans) making the required minimum repayments of principal and interest to the company by 30 June 2024.

Note that a repayment must be a genuine repayment, that is it cannot be shortly taken back out of the company. This is on the ATO’s radar as the ATO are currently running a Division 7A educational series meant to increase awareness of the rules within Division 7A.

Tax is an ever-changing legislative framework and having your tax planning up to date can ensure any changes are utilised more effectively.

By utilising any available tax strategies now, both individuals and business owners will set the tone for the following financial year. Once taxpayers get into a habit of being fully across their tax affairs and what needs to happen, and when, it becomes more efficient and effective to manage.

Contact your HLB Mann Judd adviser should you wish to learn how we could help with your year end tax strategies.