How to end the financial year on a high note

As the financial year draws to a close, it’s the perfect time to review your financial affairs and set the stage for a successful new financial year. By taking care of essential tasks and implementing strategic planning, you can position yourself for a smooth transition and a strong start for the year to come.

Topping up super

One important item for the To Do list is to top up your super with either concessional (pre-tax) or non-concessional (post-tax) contributions. For example, you could make a voluntary concessional contribution up to the limit allowed and then claim a tax deduction on your personal assessable income for it.

Consider making additional contributions to your own super account or your spouse’s account, to take advantage of tax concessions.

If you have unused concessional cap amounts from the previous five years and a super balance less than $500,000 on June 30 the previous year, you may be eligible to make a catch-up (or carry-forward) contribution greater than the annual limit.

Maximising contributions not only helps you build your retirement savings but can also provide valuable tax benefits. But it’s critical to be mindful of your caps and to ensure that you make any super contributions before the end of the financial year to meet the deadline.

Reviewing investments

Reviewing your investment portfolio is a valuable task at any time but particularly now.

For example, you could take a look for any capital gains or losses that could be used strategically to manage your tax liability.

Also, it is worth considering how your portfolio performed over the past 12 months against your goal of capital growth, income, or balance.

You may decide to readjust your goals or your investments to help steer performance in the right direction for the next 12 months.

Of course, if you’re planning any changes, it’s important to check in with us to ensure you’re making informed decisions about your investments.

Paying expenses early

Another useful strategy at tax time can be to bring forward any deductible expenses or interest payments before 30 June to reduce your taxable income.

That could include incurring expenses on an investment property, prepaying interest on investment loans, making charitable donations, or claiming eligible work-related expenses.

Make sure you keep detailed records and receipts to support your deductions.

The ATO’s myDeductions app is a great place to start for free record keeping and to assist you to be ready for tax time.

Setting up salary sacrifice

As you look ahead to the new financial year, consider whether a salary sacrifice arrangement might be right for you.

Salary sacrifice allows you to divert a portion of your pre-tax salary directly into your superannuation, which effectively reduces your taxable income and boosts your retirement savings.

You will need to think carefully about your living expenses to work out the amount you can afford to contribute to your super, ensuring you do not exceed your concessional (before-tax) contributions cap of $27,500 (which will increase to $30,000 from July 1 2024) to avoid paying any extra tax.

Your employer or payroll department can help you set up a salary sacrifice arrangement.

Checking your budget

This is a good time to revisit your financial goals and how you’re tracking, and then put together a strong budget for the new financial year that will help get you further along the track.

Take the time to review your income and expenses and identify any areas where you can cut back spending or improve your income.

This exercise not only helps you understand your financial habits but also allows you to reallocate funds towards your goals, such as paying down debt, building an emergency fund, or increasing your investment contributions.

Consult with professionals

Don’t forget to check in with your trusted advisers – financial advisers, accountants, or tax professionals – to make sure you are making the most of any opportunities for financial growth and maximising tax savings.

Taking advantage of our expert advice to review your current financial situation and goals, and check that you are making the best decisions for you can make a difference. It provides peace of mind, ensures that you are complying with any obligations and, importantly, puts you in the best position to achieve your financial goals.

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Tax update June 2024

Tax cuts ease the message of greater ATO oversight

Every taxpayer can look forward to a tax cut from 1 July thanks to the centrepiece of the Federal Budget delivered in May.

On average, taxpayers will save around $36 a week under the new rules, which were legislated in February.i

The lowest tax rate in 2024-25 reduces from 19 per cent to 16 per cent, and the 32.5 per cent marginal tax rate reduces to 30 per cent for those earning between $45,001 and $135,000.

The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000.

The Budget also included a commitment to reform current tax laws and give the ATO discretion to stop chasing on-hold historical tax debts of individuals and small businesses.

Boost for tax compliance

Other Budget tax measures include a $2.5 billion crackdown on the shadow economy, as well as other fraud and tax avoidance through upgrades to the ATO’s IT systems to enable real-time identification and blocking of suspicious activities.ii

A new compliance taskforce will also be formed to focus on recovering lost revenue and stopping fraudulent refunds.

Instant asset write-off retained

Small businesses will be pleased to know that the deadline for the popular $20,000 instant asset write-off has been extended to 30 June 2025.iii

Under the instant asset write-off rule, small businesses with an annual turnover of less than $10 million are permitted to immediately deduct eligible assets of less than $20,000, rather than depreciate them.

Key focus areas

The ATO has announced it will be taking a close look at three common errors taxpayers are making in returns lodged this financial year.

These include incorrectly claiming work-related expenses, inflating deduction claims for rental properties and failing to include all income when lodging a return.

Work-from-home expenses will need comprehensive substantiation and rental landlords will need to carefully check their repairs and maintenance deductions.

Meanwhile, existing CGT exemptions for foreign residents buying and selling assets will be tightened.

Unpaid GST and income debts

The ATO has signalled it intends to increase its focus to ensure both individuals and businesses pay their tax and super obligations on time.

For example, there will be a crackdown on businesses failing to pass on $50 billion in undisputed debts for GST and PAYG from employee wages.

Around 65 per cent of this debt is owed by small businesses and the ATO has warned it is returning to its normal, pre-pandemic debt collection practices.iv

Changes for trust tax returns

Small business owners who are trustees or trust beneficiaries need to remember new income tax reporting changes commence on 1 July 2024.

Trustees will be required to provide additional information about capital gains tax on the trust’s tax return statement of distribution to provide beneficiaries with additional information when completing their trust income reporting obligations.

Trust income from managed funds will also be reported with the additional details.

SG payment reminder

With the new Super Guarantee (SG) payday rules due to start on 1 July 2026, the ATO is  reminding employers they need to ensure timely payment of their quarterly SG obligations.

Payments for the fourth quarter (1 April to 30 June 2024) are due by 28 July at the latest, with more frequent payments being encouraged.

Check for unlawful tax schemes

The ATO has warned businesses again about the potential risks of becoming involved in unlawful tax schemes, including structured arrangements incorrectly classifying revenue as capital, exploiting concessional tax rates and obscuring the source of funds or party relationships.

Warning signs for these schemes include zero-risk guarantees, being asked to maintain secrecy and fees or commissions based on the tax saved.

We’d be happy to provide further information or clarification about any of the new tax measures or to provide advice if they affect you.

i https://budget.gov.au/content/factsheets/download/factsheet-col.pdf
ii https://budget.gov.au/content/bp2/download/bp2_02_receipt_payment.pdf
iii https://budget.gov.au/content/factsheets/download/factsheet-sml-bus.pdf
iv https://www.publicaccountants.org.au/news-advocacy/media-releases/2024-25-australian-federal-budget-chalmers-fails-to-charm-small-business-owners

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Victorian Stamp Duty for Industrial and Commercial Property changes

In the latest budget, the Victorian Government announced significant changes to the payment and application of Stamp Duty for Industrial and Commercial Properties as of 1 July 2024.

The Commercial and Industrial Property Tax Reform Act 2024 (Vic) (the Act) provides that commercial and industrial properties in Victoria will be subject to stamp duty for a final time when it is next sold or otherwise transacted after 1 July 2024. Ten years later from the time at which the transaction takes place, it will transition to the new annual Commercial and Industrial Property Tax (CIPT) imposed at the rate of 1% of the unimproved value of the land. The CIPT will be in addition to land tax.

Notably, properties that are not sold or transacted (a change of ownership of more than 50%) will remain outside the CIPT regime and CIPT will not be payable even after the 10 year transition period.

What properties does this apply to?
Only properties and land zoned Commercial or Industrial fall within this new reform. The State Revenue Office will rely on Council Rates for assessing whether a property is Commercial or Industrial.

Mixed-use properties will be assessed on a case by case basis and the Commissioner will make a determination as to whether the property is primarily used for Commercial or Industrial. If so, CIPT will be payable. If not, CIPT will not be payable. This is an all or nothing situation.

What triggers the introduction of CIPT?
A change of 50% or more ownership in a property will trigger the transition to CIPT. Minority investors may become subject to CIPT directly or indirectly if a majority interest in the property is changed (which may occur in a syndicate) on or after 1 July 2024.

Owners seeking to change ownership of their commercial or industrial property between trusts, SMSFs or corporations that transact after 1 July 2024 will also trigger the implementation of CIPT.

Do I still pay Stamp Duty?
Stamp Duty will still be payable on the first transaction for that particular property that occurs on or after 1 July 2024. Stamp Duty can be paid upfront (as would usually occur) or you can apply for a Government Funded Support Loan which incurs interest (rate still be determined but looking like approximately 7%pa) and repayments are to be paid annually over 10 years. If you sell within the 10 years the Loan is to be repaid in full and it is likely that break costs will be charged. The Loan does not fall to the next purchaser.

This first transaction triggers the property to enter the CIPT scheme and 10 years from that date CIPT will be payable. If, for example, 3 years after the first transaction, the property is then sold, this next transaction does not incur Stamp Duty but CIPT will be payable in 7 years time by whoever owns the property at that time.

What is the rate of CIPT?
The rate of CIPT is 1% of the unimproved value of the property (as assessed on your Council Rates Certificate). It is an annual tax and is to be paid in addition to regular land tax. For example, if the unimproved value of the property is $800,000 your CIPT will be $8,000 annually.

The owner of the property as of 31 December immediately preceding the tax year has the liability of the CIPT and this cannot be adjusted on the sale of the property.

Can I pass CIPT onto my Tenant?
In most instances, no you cannot pass CIPT onto your Tenant for payment as an outgoing. The Retail Leases Act 2003 prohibits the passing on of CIPT and Land Tax to a Tenant as an outgoing. If your Lease does not fall within the confines of the Retail Leases Act 2003 then, subject to the terms of your lease, you may be able to pass on payment of CIPT to the Tenant.

What if I leave my property as it is for the next 20 years?
If you do not change the ownership of your property over the next 20-30 years then you will not trigger CIPT and it will not be payable. Bear in mind that this is the case under the current legislative framework and there is no guarantee that this, or the rate of the CIPT, will not change in the future.

What should I do?
If you have no intention of changing the ownership structure of your property for the foreseeable future, then you do not need to do anything. If a change is on the cards, you should transact this change (sign a Contract or Transfer of Land) prior to 1 July 2024.

If you are looking at purchasing a Commercial or Industrial property, you should sign a Contract of Sale before 1 July 2024.

In summary:

  1. CIPT applies to changes in ownership of Commercial or Industrial properties with a Contract signed and settlement taking place after 1 July 2024;
  2. The first transaction after 1 July 2024 will incur Stamp Duty which can be paid in full or via a government funded transition loan;
  3. 10 years after the first transaction, CIPT will be payable by the then current owner at the rate of 1% of the unimproved value.
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