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Accountants should look for opportunities to bring forward deductions and apply them to this year’s income ahead of the personal tax changes on 1 July, says HLB Mann Judd.
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‘Take advantage of deductions’ ahead of tax cuts, tax expert advises
24 April 2024
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11 minute read
HLB Mann Judd tax director Peter Bardos said with 3.6 million Australian taxpayers set to receive a tax cut in the new financial year, now is a good time for accountants to assess their client’s finances and take steps to manage tax liabilities.
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“The changes to the personal tax rates from 1 July 2024 mean that anyone whose income levels are unchanged will pay less tax next financial year than they are paying this year,” Bardos said.
“As a result, it makes sense to bring forward any deductions and apply them to this year’s taxable income, and push back any income into next financial year if they can.”
For example, clients may want to sell shares on 1 July rather than 30 June so that the income is taxed at a lower rate in the next financial year, he explained.
Another area to be aware of is that this is the last year people can take advantage of the carry-forward rules on unused super contribution concessions from the 2018-19 financial year.
“From 1 July, any unused concessional contribution caps from the 2018-19 financial year will expire. This is the first time we have reached the point where the cap will expire so it may catch some people by surprise,” said Bardos.
“Those planning to carry forward their unused caps must make sure they do so well before 30 June, as the money must appear in their super fund before the end of the financial year, not just get transferred by that date.
Bardos warned that it can take a few days for the transfer to get processed so it’s important to leave enough time.
“In addition, the relevant notices from the super fund must have been received before a tax return can be completed, so timing is very important,” he said.
New areas of interest for the ATO
HLB Mann Judd said accountants and their clients should also pay close attention to the ATO’s new areas of interest.
“We are seeing the ATO increasingly talking about areas that, in the past, weren’t worth its while to chase,” said Bardos.
“However, better data and technology are making it easier and cheaper for the ATO to crack down on certain behaviour.
“People should be aware that just because they got away with things in the past, it doesn’t mean they will get away with it this year and indeed, the ATO has flagged some areas that it will be focusing on.”
One particular area is shareholder loans, where a shareholder has borrowed money out of their private company during the year and then repays the loan just prior to 30 June, therefore reducing their tax payable. They then take the money back out of the company shortly afterwards, he said.
“There may be valid reasons why people need to borrow money from the company, but the repayment must be genuine and if it suddenly appears back in the shareholder’s account a few days’ later, the ATO’s data-matching capabilities mean it could come to their attention,” said Bardos.
“The simple advice here is – don’t do it. If it is a valid withdrawal from the company then people should declare it as a dividend, or they should set up a repayment schedule over a period of time.”
Another area where the ATO is increasingly cracking down is where people make payments from a family or discretionary trust to their children.
“If the money isn’t appropriately set aside for the children or transferred into the child’s bank account, then the ATO may start asking questions,” said Bardos.
“It’s likely that, as technology continues to improve – including through AI – the ATO will become more efficient at identifying even small breaches and has made it very clear that it will be monitoring taxpayer behaviour very closely.”
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