With the end of the 2019 financial year looming closer, there are still some last-minute tax planning tips you can use in order to help maximise your tax position. Here are a few ways you can help either increase your overall tax refund or decrease the amount payable:
The Australian Taxation Office (ATO) have tightened their tolerance on taxpayers claiming motor vehicle kilometres travelled. Whilst many taxpayers are claiming the 5,000km max rate in any given year, they are now issuing more audits in order to ensure that these kilometres relate solely for work-related travels. Work-related travels mean travels made from work-to-work NOT home-to-work or work-to-home travels. One key area that has created flags for clients when claiming these kilometres has been when figures are rounded off indicating that a calculation may not have been made.
One suggestion when presenting motor vehicles travelled to your tax agent will be to sit down prior and calculate exactly how much kilometres for work you have actually travelled. This does not mean you need to go citing receipts (for the set-rate method), but a form of calculation done by the taxpayer is mandatory to prove such kilometres actually do exist. This will make it a lot easier for your accountant to claim these kilometres into your tax return and maximise your tax position.
A common area of confusion with capital gains is WHEN during which financial year the capital gains actually occurred. Capital gains is realised on the date the contract of sale was signed, not when the date of settlement occurs. Although simple, this has caused taxpayers to underestimate their tax payable when finalising their tax return. They may not have been prepared to pay the large sum of tax owing so soon. One way to avoid this can be to avoid selling any large value assets until the financial year end has passed – this includes signing and dating any purchase contracts after the 30th June.
If you have already sold assets during the financial year and expect to be paying capital gains tax, one way to decrease the overall tax payable owing can be to sell any underperforming assets. You may be waiting to sell this at a later date however, proper assessment of the performance of the asset may result in a better scenario if you were to sell during the current financial year. To seek further advice on when to sell your assets, please speak to your trusted accountant.
For those of you who own investment properties. One way to increase your negative gearing is by negotiating with your finance provider to pay your loan interest in the next 12 months, upfront. This is particularly useful for those who have sold assets and are expected to pay higher taxes due to capital gains. Bringing forward any expenditure such as repairs and maintenance for investment properties to this financial year instead of the next will also help improve your overall tax position.
INCOME AND EXPENSES
Taxpayers who are running businesses can utilise options such as pushing forward their invoices until the next financial year. They can also realise expenses earlier in order to pay for them during this financial year. Remember, many businesses are run under an accrual method which means income and expenses are reported based on when they are earned/incurred not when the cash is paid/received. This allows a bit of flexibility in which periods to claim your income and expenses when approaching the financial year end.
Many factors need to be considered before you start taking actions on maximising your tax position. In some cases, you may decrease the amount of tax you pay but you need to ask yourself whether it’s really worth it based on your personal situation or business performances. These are discussions that need to be made between yourself and your trusted accountant. Remember, accountants are here to help improve you overall position so giving them a quick call or scheduling a meeting to do some tax planning may well be the very difference in saving yourself hundreds or even thousands of dollars.
Steven Wong Accountants
Accounting for Growth