A few weeks left to improve tax positions for 2012
Whilst you can’t escape paying tax – you have just weeks to reap the benefits of some effective tax planning.
Effective tax planning before the June 30 can help many taxpayers improve their tax position, said Frank Brass, Regional Director H&R Block.
“Tax planning over the next weeks can make a difference to someone’s overall tax position,” said Frank Brass. “Many taxpayers want to tune out to the constant news around new tax rates, the new carbon tax, means testing of private health rebates, medical expense rebate thresholds and constant tinkering with superannuation rules. However, using the next few weeks to act on some simple advice may vastly improve a taxpayer’s overall position.”
“There are some simple things that can be done before 1 July which can have a positive impact on your tax return. Remember, if you can push taxable income or benefits out to July, and make tax deductible payments in June – many taxpayers can make a significant impact on their tax position” said Frank Brass.
“Taxpayers should plan for tax changes. Many taxpayers earning under $80,000 next year will benefit from the new $20,000 tax free threshold introduced in 2013. For many deferring a bonus or other taxable payment until after 30 June 2012 may result in more cash in their pocket.”
“It is important that taxpayers act now on their end-of-year strategies. Simple measures like deferring income, pre-paying expenses, contributing to superannuation and getting the right method of claim for work related vehicles; can result in thousands of dollars of claimable and deductible expenses,” said Mr Brass.
“Australian households and businesses are very concerned by uncertainties in the economy and the potential impact of the new carbon tax. We are seeing a renewed focus by taxpayers on planning for maximum entitlement, reducing debt and getting better value for their dollar,” said Frank Brass.
“H&R Block has produced a 2012 Tax Guide to assist Australian families and businesses maximise their tax positions before 1 July” said Mr Brass.
Full details of the H&R Tax Guide follow. The Tax Guide is indicative and not exhaustive. H&R Block advise it is provided as a broad outline and individuals should seek professional advice.
H&R Block Tax Guide
There are steps you can take now to improve your tax position.
These strategies must be completed by 30 June 2012 to be effective for your 2012 tax return.
Defer taxable Income.
If your taxable income for 2013 will be under $80,000 deferring your taxable income would be a wise strategy as the tax free threshold for the 2013 increases to $20,000.
To utilise this strategy of delaying income you need to check what income you are likely to receive in the last quarter of the financial year and, if appropriate, delay that income to the next financial year.
Important note for sole traders and partnerships
There would be little point in deferring this income if it pushes you into a higher tax bracket next year which would result in more overall tax being paid.
Salary & Wage earners
This is harder to do for this group, but if you are due a bonus, you may be able defer its payment.
Important note for companies
Companies pay a flat rate of 30% on profits, so this does not apply.
Carry out any repairs to equipment and premises prior to 30 June.
Repairs are deductible in the year they are carried out. Improvements and additions are generally depreciated.
Prepay expenses where possible.
Rent, accounting fees, interest expenses, subscriptions. Be careful of the different prepayment rules that apply to different classes of taxpayers.
Good management of the trading stock will decrease your income for the year.
Do an advanced purchase of business consumables
A4 paper, toner cartridges, stationery items, etc.
Pre payments do not apply.
Write off bad debts
You need ensure your bad debt qualifies to be written off.
Superannuation deduction for self-employed business people
You can claim 100% of the amount contributed provided
You notify the fund of the contribution
Receive a confirmation in writing from the trustee of the super fund
A tax loss is not created
Concessional (where you claim a tax deduction)
Under 50 years of age $25,000
Over 50 Years of age $50,000
Non Concessional, no Deduction allowable
If you are 75 or over, you can only claim a deduction for contributions you made before the 28th day of the month following the month in which you turned 75.
If you are under 18 at the end of the income year, you can only claim a deduction for your personal super contributions if you earned income as an employee or a business operator during the income year in which you claim the deduction.
Contributions on behalf of spouse
This is subject to income limit of $13,800 for the spouse. A rebate of $540 is available to those who qualify. A full rebate will apply if the assessable income, reportable superannuation contributions and reportable fringe benefits of the spouse is no more than $10,800. A reduced offset will be available provided the spouse’s income does not exceed $13,800.
Co-Contribution - where the government contributes as well
You will be eligible for the co-contribution if all of the following apply:
you make a personal superannuation contribution by 30 June each year into a complying superannuation fund or RSA and don't claim a deduction for all of it and your total income (less any business deductions for the 2011–12) is lower than $61,920
10% or more of your total income is from eligible employment or carrying on a business or a combination of both
you are less than 71 years old at the end of the year of income
you do not hold an eligible temporary resident visa at any time during the year,
unless you are a New Zealand resident or holder of a prescribed visa
you lodge your income tax return for the relevant financial year.
How much will I receive?
The government will contribute to your superannuation fund $1 for every $1 you contribute; up to a maximum co-contribution of $1,000 a year but the amount will reduce by 3.333 cents for every dollar your total income is over $31,920 and cuts out fully at an income of $61,920.
Offset capital gains against capital losses
If you have a capital gain in this financial year, look to your other investments to see if it is worthwhile to realise a capital loss to offset the capital gain against.
Maximise medical expenses
If you or your family members need to have some medical work or procedure done it is worthwhile trying to consolidate them into one financial year as you are entitled to a rebate o f .20c in the dollar for every dollar spent over $2,000.
Review your asset register for any assets that are obsolete and no longer used in the business and dispose or scrap them. This will give rise to a Balancing adjustment and a deprecation claim. This is particularly important for businesses.
If you purchase your Income protection insurance prior to 30 June you can claim it in this year’s tax return.
Business Owners Other matters to consider at the end of the financial year
You must do a stock take of any trading stock you have as at 30 June. These should be listed with a total value calculation,
Prepare a debtors and creditors list as at 30 June if your business uses the accruals accounting method.
Companies must manage the shareholder loan account
Pl an to prepare the Pay As You Go Withholding annual statements for your staff to be issued in early July
Ensure all your BAS’s have been lodged for the financial year. Large penalties can apply for non lodgement of BAS’s.
Start keeping log books and record cards to enable claims for
Motor Vehicle - need to keep a log book for 90 days to determine claimable percentage
Home Office - keep one month’s log
Mobile and Home Phone - keep one month’s log.
Additional H&R Block tax tips are available at http://hrblock.com.au/tax_tips
10 June 2012.