For individuals and businesses alike, year-end tax planning offers a valuable opportunity to assess financial positions, identify potential tax-saving strategies, and make informed decisions to optimise tax liabilities. However, it’s important to consider your ultimate personal and business goals together with your cash flow before implementing any tax planning strategies. Spending money for a deduction in the current financial year may not be the best value for money.
In this two-part article series, we are going to look at the key areas to be considered and potentially addressed by both individuals and businesses.
Let's start with the key areas for individuals:
Super contributions – individuals (concessional and non-concessional contributions)
Review your wealth creation structures, ensure that they remain appropriate and continue to meet your requirements prior to 30 June 2024.
If you have started a pension from superannuation, it is important that you have drawn the required minimum pension for the current financial year before 30 June 2024. The minimum pension payments for the 2024 financial year are based on the member account balance as at 30 June 2023, and are as follows:
| Age of beneficiary | Percentage factors (%) |
|---|---|
| Under 65 | 4 |
| 65-74 | 5 |
| 75-79 | 6 |
| 80-84 | 7 |
| 85-89 | 9 |
| 90-94 | 11 |
| 95+ | 14 |
There is no maximum limit, except for transition to retirement pensions which is limited to 10%. The payment amount will be calculated based on the member account balance as at 30 June 2023.
As of 1 July 2024, the Superannuation Guarantee (SG) rate rises to 11.5%, with a further increase to 12% on 1 July 2025. Employees should review their employment agreements to determine the impact the SG percentage increase may have on their take-home pay.
The government has proposed a change to tax on superannuation ‘earnings’ for those with total super balances above $3 million. This will effectively increase tax payable to 30% (from 15%) to be implemented from 1 July 2025.
In preparation for this change, we recommend reviewing you super balances and where possible determine if implementing an early strategy such as equalising spouse balances is beneficial. See here for further details on the proposed changes.
Individuals are able to make personal concessional contributions from pre-tax funds to claim a tax deduction in their income tax returns for the year ended 30 June 2024. The tax deduction is only deductible in the 2024 tax return where the superannuation fund receives the contribution by 30 June 2024. The general concessional contributions cap is $27,500 for the 2024 financial year (moving to $30,000 from 1 July 2024).
Where you have an unused concessional cap amount from the 2019 through to 2023 financial years, the carry-forward arrangement may be utilised to make extra concessional contributions in the 2024 financial year. This arrangement is available if your total superannuation balance as at 30 June 2023 was less than $500,000 and you have, or are planning to, make concessional contributions in the 2024 year that exceed the general concessional contributions cap.
The additional concessional contributions relate to any unused cap amounts from previous years starting from the 2019 financial year. The unused cap is able to be carried-forward and used in a future year, although it expires after five years. Any unused concessional contributions remaining from the 2019 year will expire on 30 June 2024 if not utilised before this date.
When making any additional concessional contributions before 30 June 2024, it is important to:
This will assist with ensuring the concessional contributions cap is not exceeded for the period ended 30 June 2024. If a taxpayer exceeds the 2024 cap of $27,500 (and any carry-forward cap), the excess amount is included in their 2024 income tax return and taxed at their marginal tax rate.
Individuals are able to make non-concessional contributions for the year ended 30 June 2024 where their superannuation balance is less than $1.9 million at the end of the previous financial year. These contributions are not tax deductible and are not taxable in the superannuation fund. The non-concessional contributions cap for the 2024 financial year is $110,000 (moving to $120,000 from 1 July 2024).
If you are under 75 years of age, you may be eligible to make contributions above this annual non-concessional contributions cap by gaining access to future year caps under the bring-forward arrangement. This is reliant on the bring-forward arrangement not being utilised in the previous three years.
The bring-forward arrangement allows you to make extra non-concessional contributions without the requirement of paying extra tax. The availability of this arrangement in this financial year will depend on your age and total superannuation balance as at 30 June 2023. The relevant bring-forward limits for the 2024 financial year are as follows:
| Super balance at 30 June 2023 ($) | Maximum non-concessional contribution for the first year ($) | Bring-forward period |
|---|---|---|
| Less than 1.68 million | 330,000 | 3 years |
| 1.68 million to less than 1.79 million | 220,000 | 2 years |
| 1.79 million to less than 1.9 million | 110,000 | No bring-forward period, general non-concessional cap applies |
| 1.9 million and over | Nil | N/A |
For the 2024 income year individuals must utilise either the actual costs or the fixed rate method to calculate a deductible working from home amount.
The fixed rate method is 67 cents per hour worked from home and covers energy expenses, internet, stationery and computer consumables, without the requirement for a dedicated home office. Additional deductions can be claimed for the decline in value of assets such as computers and office furniture; repairs and maintenance of these assets; and cleaning costs for a dedicated home office.
To claim a working from home expense deduction, you must keep the relevant records. The record requirement is different depending on which method you choose:
Now is the time to contact your advisor to understand the timing and quantum of your tax liabilities. Tax planning should be considered annually in June or earlier to take advantage of relevant strategies where it is commercially practical for you and/or your business.
If you would like to discuss any of this in more detail, reach out to Pilot Chartered Accountants via your Credabl consultant, or contact us on 1300 27 33 22.