How clever tax planning can change your life

The end of the financial year just around the corner, now’s the perfect time to start thinking about your tax planning strategies. By planning ahead before June 30, 2024, you can reduce your tax bill and boost your savings, leaving more money in your pocket. Given the high interest rates and living costs we’re all facing, every dollar saved can make a big difference and has the potential to be life changing.

Imagine what you could do with the money you save on taxes year on year. 

You could…

  • Take that dream holiday
  • Pay down your home loan
  • Add to your superannuation
  • Buy an investment property
  • Pay for your kids’ education
  • Upgrade your car

Wait, what is Tax Planning?

Tax planning is all about estimating your expected income and tax payable for 2024 for everyone in your family. This helps us come up with strategies to spread your income in the most tax-effective way, legally reducing your tax bill. 

It includes…

  • Estimating the 2024 taxable income for everyone in your family
  • Estimating the 2024 tax payable for everyone in your family
  • Developing income spreading strategies to lower your family’s overall tax bill
  • Advising you on tax-saving strategies for 2024
  • Meeting with you to answer any questions about our tax strategies
  • Creating a personalised action plan that works for you

Some of the tax planning strategies we use include:

1. Considering Division 7A: For companies, Division 7A rules govern how profits and cash are taken out. Not following these rules can lead to big tax problems. We make sure the right dividend amounts are paid to cover minimum repayments on existing loans, keeping you compliant.

2. Leveraging Trusts: Trusts can be a great way to spread income for tax purposes, but they need careful handling. Trustees must decide in writing how to treat the trust’s income before June 30 each year. If not, default clauses might kick in or the trustee could be taxed at the highest rate. We ensure distributions are done in the most tax-friendly way and that trust resolutions are prepared correctly according to your trust deed and ATO guidelines.

3. Amplifying Superannuation: Super contributions are crucial at this time of year. Think about making concessional and non-concessional contributions based on your wealth and retirement goals. The concessional contribution cap for 2024 is $27,500, increasing to $30,000 in 2025. You might be able to access this higher cap early and carry forward unused contributions from previous years, which helps grow your super and reduce taxable income.

4. Using the Lower Company Tax Rate: The 2024 company tax rate for businesses with a turnover of less than $50 million is 25%, provided 80% or less of the company’s income is “passive income” (like interest, dividends, rent, royalties, and net capital gains). If you use a trust structure, one strategy is to allocate profits to a “bucket company” and cap your tax at 25% for the 2024 year. Make sure your company qualifies as a “base rate” entity to be eligible for the lower tax rate. Have a chat with us to see if your company qualifies.

5. Bringing Forward Expenses: Buy consumable items before June 30, 2024. These include marketing materials, stationery, printing, office supplies, and computer supplies. Spend the money now to get the deduction this year.

These are just a few of the tax planning strategies you can use before June 30, 2024 that could end up saving you a considerable amount of money. By prioritising clever tax planning, you can make sure you’re taking advantage of all the financial opportunities available as the financial year comes to a close.

Next Steps

Remember, everyone’s financial situation is very unique, so the best results always come from personalised strategies. Contact our team to chat about how our personalised tax planning strategies can help you save tax and win at life.

Any questions about something you’ve read here? Drop us a line at [email protected] or give us a call on 03 5221 0079.