It’s tax season, so it’s time to start thinking about ways to reduce your personal tax bill before 30 June 2023. By doing so, you’ll have more money in your pocket to use for whatever you want, whether it’s paying off your home loan, adding to your super, saving for a holiday or an investment property, paying for your children’s education, or upgrading your car.

If you’ve been working from home, you may be able to claim tax deductions for home office expenses. The ATO allows you to claim using a “Revised Fixed Rate Method” of $0.67 per work hour for the 2023 year, which covers most expenses from working from home. Alternatively, you can claim expenses using an “Actual Cost” method, so be sure to keep all invoices and receipts throughout the year to prove your claims.

When it comes to superannuation contributions, there are a few strategies you can use to maximise your balance and potentially reduce your tax. The tax-deductible super contribution limit is $27,500 for all individuals under age 75, so consider making the maximum contribution before 30 June 2023. This strategy is advantageous because super contributions are taxed at between 15% to 30%, compared to typical personal income tax rates of between 34.5% and 47%. Additionally, you may be able to use any unused concessional contribution caps on a rolling basis for up to five years, and you can make super contributions on behalf of your spouse to help boost their retirement savings and potentially save on tax.

If you own an investment property, be sure to get a Property Depreciation Report from a Quantity Surveyor, which will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself. This report’s cost is typically recouped several times over by the tax savings in the first year of property ownership.

Lastly, you can review the ownership of your investments for longer-term tax planning purposes, but any change of ownership should be carefully planned due to capital gains tax and stamp duty implications. Investing through a Family Trust may provide flexibility in distributing income on an annual basis and an ability for up to $416 per year to be distributed to children or grandchildren tax-free.

Remember that there’s no point in spending money to get a tax deduction unless it’s going to result in something useful for you. If you have any questions or concerns about your tax planning strategy, it’s always a good idea to seek advice from your accountant.

Imagine what you could do with tax saved!

Take a look at tax-saving strategies before June 30, 2023. With the money you save, you could reduce your home loan, boost your super, save for a future vacation, invest in property, pay for your children’s education, or even upgrade your car. However, spending money just to claim a tax deduction is pointless unless it actually benefits you.

Home office expenses

If you’ve been working from home, you might be able to claim tax deductions for your expenses. The ATO lets you use the “Revised Fixed Rate Method” of $0.67 per work hour for 2023, covering most expenses. Keep track of the hours claimed and use the “Actual Cost” method if you have receipts.

Superannuation contributions

Even if you can’t currently contribute large amounts to your superannuation, it’s important to know what options are available to increase your super balance and potentially lower your taxes.

Deductible super cap of $27,500 for everyone

Everyone can make a tax-deductible super contribution of up to $27,500, but if you’re over 67, you’ll need to pass a work test. Making the maximum contribution before June 30, 2023, can save you money on taxes since super contributions are taxed at lower rates than personal income tax.

Carried forward contributions

Carry-forward contributions allow super fund members to use their unused concessional contribution cap for up to five years. If you haven’t used the full amount of your concessional contribution cap, you may be able to take advantage of it later. The unused amount expires after five years. These rules only apply to concessional contributions, not non-concessional contributions.

Spouse super contributions

You can make super contributions for your spouse if your fund allows it and you meet certain criteria. This can increase your spouse’s retirement savings and help you save on taxes if they have limited income. If your spouse’s income is $37,000 p.a. or less, you may be eligible for a tax offset of up to $540 on contributions of up to $3,000. The offset reduces for income above $37,000 and ends at $40,000.

Additional tax on super contributions by high Income earners

High income earners who make super contributions may be subject to an additional 15% tax called ‘Division 293’ if their income exceeds $250,000 per year. Despite this, contributing within the cap is still a tax-efficient approach. With a maximum tax rate of 30% on super contributions and 15% on investment earnings in super, it’s a more favourable tax point compared to the highest marginal tax rate of 47% (including the Medicare levy).

Government co-contribution to your super

If you earn a lower income and make a non-concessional contribution to your super, you may receive a Government co-contribution of up to $500. To receive the maximum co-contribution of $500 in 2023, you need to contribute $1,000 and earn $42,016 or less. A lower amount may be received if you contribute less than $1,000 and/or earn between $42,016 and $57,016.

Ownership of investments

To plan for long-term taxes, consider reviewing the ownership of your investments. Changing ownership can affect capital gains tax and stamp duty, so it’s important to get advice from an Accountant beforehand. A Family Trust can provide flexibility in distributing income annually and allow up to $416 per year to be distributed tax-free to children or grandchildren.

Property depreciation report

A Property Depreciation Report prepared by a Quantity Surveyor for your investment property can help you claim depreciation and capital works deductions on the property and its capital items. Although the report has a cost, you may recoup it several times over through tax savings in the first year of owning the property.

Motor vehicle log book

To claim motor vehicle expenses for tax purposes, keep a 12-week Motor Vehicle Logbook that starts on or before 30 June 2023, record your odometer reading as at 30 June 2023, and keep all receipts/invoices. The logbook can be used for 5 years. Alternatively, you can claim up to 5,000 business kilometres (based on a reasonable estimate) without a logbook using the cents per km method.

Sacrifice your salary to super

By choosing to sacrifice a portion of your salary and contribute it to your superannuation fund instead, you could potentially lower your tax bill and increase your retirement savings. This strategy is particularly helpful for those earning an annual income of $45,000 or more, and those who are approaching retirement age.

Prepay expenses and interest

One way to reduce your tax bill is by prepaying expenses related to your investments before 30 June 2023. You can prepay up to 12 months of interest on an investment loan and claim a tax deduction this financial year. Other investment expenses such as rental property repairs, memberships, subscriptions, and journals can also be prepaid.

Insurance Premiums

Protecting your ability to earn an income is crucial. Income Protection Insurance can provide a financial safety net by replacing up to 75% of your salary if you cannot work due to illness or accident. The insurance premium is generally tax-deductible, and prepaying the premium for 12 months can increase your deductions. This is a small price to pay for peace of mind and protecting your family’s lifestyle.

Work related expenses

Remember to keep receipts for work-related expenses like uniforms, training courses, and learning materials, as they could be tax-deductible.

Realise capital losses

You should consider selling any underperforming investments you own before 30 June 2023 to realise a capital loss and potentially lower or remove any future capital gains tax liability. Unused capital losses can be applied to offset future capital gains.

Defer investment Income & capital gains

Try to schedule the receipt of investment income, such as interest on term deposits, and the contract date for the sale of capital gains assets after June 30, 2023, to defer tax liability to the next financial year. Remember that the contract date is the crucial date for determining when a sale or purchase took place.