Personal tax planning guide 2024

Remember the stress of handling your personal tax before the financial year ends? Disappearing receipts, late-night Googling sprees about "what can I claim on tax without receipts" and the constant worry you might have missed a crucial deduction, leaving you with a higher tax bill than anticipated. 

The worst part? 

Hiring an accountant or bookkeeper to sort through it all can feel like another tax in itself – their fees can be a real burden, especially when you're already juggling work, family, and the ever-increasing cost of living.

Fret not; this personal tax planning guide from Thriday cuts through the jargon and saves you money from deductions.

Home office expenses

Millions of Australians continue to work remotely, and the good news is that you can claim tax deductions for work-from-home expenses! The ATO offers two methods to help you maximise your return:

Revised fixed rate method

This method allows you to claim a flat rate of $0.67 per hour worked for the 2024 income year. This covers basic expenses like electricity, heating, cooling, internet usage, and phone costs associated with your work-from-home setup.

Here's the catch: To claim this deduction, you must keep a detailed record of the hours you worked from home throughout the year. This could be a simple logbook, spreadsheet, or even a timer app you use to track your working hours.

Actual cost method

For those who want to maximise their deductions and have the receipts to prove it, the actual cost method allows you to claim the actual cost of expenses directly related to your dedicated home office. This can include:

Furniture: Desks, chairs, ergonomic equipment like standing desks or special chairs.

Equipment: Computers, laptops, printers, and any software specifically used for work.

Running costs: A portion of your electricity and internet bills is based on the percentage of your home used for work.

Phone and internet: Again, the cost of your phone and internet plan is based on the percentage of work-related usage.

Stationery and consumables: Printer ink, printer paper, notebooks, pens – anything you use specifically for work.

Reminder: When using the actual cost method, you must keep all receipts and invoices related to your home office expenses throughout the year. This will be crucial when it comes to demonstrating the legitimacy of your deductions to the ATO. 

You may also read our guide to work-from-home deductions for further information. 

Superannuation contributions

Even if you're on a tight budget, consider contributing to your superannuation (super) – it's a fantastic way to save for your retirement and get some tax benefits in the process.

Tax-deductible super contribution cap

Everyone under 75 can contribute up to $27,500 pre-tax to their super in the 2024 income year. This reduces your taxable income, meaning you pay less tax!

Important Note:  Individuals over 67 need to meet a work test to claim a tax deduction for their concessional (pre-tax) contributions.  

The ATO website has more information on the work test: https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/personal-super-contributions. 

Carry-forward contributions

There's a hidden gem in the super system called carry-forward contributions. This isn't a new type of contribution but a new rule allowing you to use any unused concessional contributions from the previous five years!

If you didn't use the full amount you were allowed to contribute to your super in the past five years (the cap was $25,000 from 2019 to 2021 and $27,500 for 2022 and 2023), you can potentially carry forward that unused amount and use it in the current year (2024).

This is a use-it-or-lose-it situation! Any unused concessional contributions from 2019 will expire after this year, so now's the time to act.

Spouse super contributions

Boost your spouse's super and potentially save tax by making contributions on their behalf (also known as contribution splitting). This strategy is particularly beneficial if your spouse has a lower income.

How does this work? 

You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria and your super fund allows it.

This strategy doesn't just help your spouse build a healthier retirement nest egg; it can also benefit you financially.

Here's the double win:

Tax offset: If your spouse earns $37,000 or less annually, you may be eligible for a tax offset of up to $540 when you contribute up to $3,000 to their super. That's like getting free money from the government!

Tax-effective super: Remember, contributions to your spouse's super are treated as concessional contributions, reducing your taxable income and potentially lowering your tax bill.

How to reduce your tax bill?

1. Use superannuation strategies
   Additional Tax on Super Contributions for High-Income Earners
   • If your income exceeds $250,000 per year, you'll start paying an additional 15% tax on super contributions (Division 293 tax). However, even with this extra tax, contributing to super can still be tax-effective. Here's why:
   • The maximum tax rate on super contributions is 30%.
   • Investment earnings within super are taxed at a maximum of 15%.
     
     Both these tax rates are significantly lower than the highest marginal tax rate of 47% (including Medicare levy).

2. Take advantage of government co-contribution boost
   Eligibility for Low and Middle-earners
   • If you're on a lower income (earning at least 10% from employment or business) and make non-concessional super contributions, you might be eligible for a government co-contribution of up to $500.

3. Maximise the co-contribution
   • In 2024, to receive the maximum co-contribution of $500, you'll need to contribute $1,000 and have an income of $43,445 or less. There are also benefits for contributing less or earning between $43,445 and $58,445.

4. Review investment ownership
   • Consider restructuring your investment ownership, like using a family trust. This can provide flexibility in distributing income annually and offer tax-free benefits for distributing up to $416 per year to children or grandchildren. However, consult with your accountant before making any changes due to capital gains tax and stamp duty implications.

5. Claim property depreciation
   • If you own an investment property, get a property depreciation report prepared by a quantity surveyor. This allows you to claim depreciation and deductions on capital items within the property and the property itself. The cost of the report is often recovered within the first year through tax savings.

6. Claim work-related car expenses
   • Maintain a logbook
   • Keep a detailed and accurate motor vehicle logbook for at least 12 consecutive weeks before June 30, 2024. This allows you to claim deductions for work-related car expenses. Remember to record your odometer reading on June 30th and keep receipts for all car expenses. A logbook can generally be used for five years after it's prepared. For receipts, you may read here on how long you can keep bank statements, invoices and receipts, and other record-keeping related information.
   • Alternative method
     • If maintaining a logbook isn't feasible, you can claim a fixed cents-per-kilometre rate for up to 5,000 business kilometres based on a reasonable estimate.

7. Salary sacrifice‍
   • Salary sacrifice can be a great strategy for people earning $45,000 yearly. By redirecting a portion of your pre-tax salary into super, you can reduce your marginal tax rate and boost your retirement savings.

8. Prepay expenses & optimise income timing‍
   • Consider prepaying investment-related expenses and interest before June 30, 2024, to claim a tax deduction in the current financial year. This can include up to 12 months of interest on a property or share investments loan, rental property repairs, memberships, subscriptions, and journals.

9. Tax-deductible insurance‍
   • Income protection insurance premiums are generally tax-deductible. This insurance can replace up to 75% of your salary if you're unable to work due to illness or accident, offering valuable protection for you and your family. Similar to investment expenses, you can prepay up to 12 months of premiums to increase your deductions.

10. Don't forget work-related expenses‍
    • Hold onto receipts for any work-related expenses you incur, such as uniforms, training courses, and stationery. These may be tax-deductible!

11. Offset capital gains tax‍
    • If you have underperforming investments, consider selling them before June 30, 2024, to crystallise a capital loss. This can be used to offset any capital gains you might have, potentially reducing your capital gains tax liability. Remember, unused capital losses can be carried forward to future tax years.

12. Defer investment income and capital gain.‍
    • Always take note that the critical date for determining when a sale or purchase of a capital asset occurs is the contract date, not the settlement date.
    • The contract date is when the agreement to buy or sell the asset is signed.
    • The settlement date is when the transfer of ownership and payment for the asset takes place.
    • To defer investment income, look for opportunities to delay receiving investment income, like interest payments on term deposits or bonds.
    • Consider reinvesting interest earnings within your investment account instead of receiving them as cash. Explore alternative investments with interest payments scheduled after July 1st.
    • If you're planning to sell an investment that has increased in value (resulting in a capital gain), try to delay the sale until after June 30th. If possible,  negotiate a settlement date after July 1st with the buyer if possible.
    • Remember, even if the settlement occurs after June 30th, as long as the contract date is before June 30th, the capital gain will be counted in your current tax year.

Don't Panic! Take Control of Your Taxes with Thriday

While tax time can feel overwhelming, tools are available to simplify the process and reduce stress. Consider using Thriday, a user-friendly tax receipt app, to streamline your tax filing experience.

Gain on-demand visibility - Get instant insights into your tax position, profit and loss, and more with real-time reports. No more waiting for the end of the month or scrambling for numbers come tax time.

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Analyse business health with a detailed chart - Review easy-to-understand charts that clearly show your business's overall financial health. These insights empower you to make informed decisions throughout the year.

Collaborate with your accountant seamlessly - Thriday fosters better communication with your accountant by allowing you to share reports directly through the app. This streamlines the tax filing process and ensures everyone is on the same page.

Stay on top of deadlines with reminders - Never miss an important tax deadline again! Set up helpful reminders within Thriday to keep you on track.

With Thriday, tax time can be a breeze. Download the app today and transform tax season from a dreaded chore into a celebration of your financial savvy!

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