The current Australian tax year ends at midnight on 30 June.
This means that you really need to be taking steps now, if you haven’t already done so, to get your financial affairs in order. It’s also the time to ensure you’re taking advantage of every opportunity to minimise – or be ready to claim a refund on – the amount of tax you’ll owe when you come to submit your tax return.
Given the current cost of living crisis, anything you can do to improve your financial situation is surely worth the effort.
So, read about six important end of tax year steps you might want to consider to help you manage your tax affairs.
1. Get your financial paperwork up to date
One of the best ways to minimise the tax you pay is to keep accurate records as you go through the year.
This will help you keep your affairs in order and gain control of your finances.
It shouldn’t be an arduous process. Once everything is up to date, you should only need to set aside a short period of time each month to keep your paperwork in order and ensure your records are accurate.
Doing so could easily save you time and money, in the future.
2. You could save tax with a contribution to your super fund
By making a one-off Concessional Contribution to your super you could save up to 30% in tax.
Such a contribution, made before the end of the 2022/23 tax, will be taxed at the concessional rate for super funds of 15%, instead of at your marginal tax rate, which could be up to 45%.
So, not only will you reduce your tax bill, but you’ll also have given your super fund a handy boost.
Before doing so, you should bear in mind the “Concessional Contribution cap” of $27,500 in the current tax year. This includes any contributions made by your employer, and penalties apply if you exceed it.
Also, remember that if you didn’t maximise your tax-efficient concessional limit in the 2021/22 tax year, you may be able to carry forward any unused Concessional Contributions from that year.
3. Boost your super fund with a Non-Concessional Contribution
As well as Concessional Contributions, you can also give your super fund a big boost by making a voluntary Non-Concessional Contribution (NCC) before the end of the tax year.
The NCC cap is four times the current limit on Concessional Contributions – so $110,000 in the 2022/23 tax year.
As these contributions are made into your super fund from your after-tax income, they are not taxed in your super fund.
4. Make a tax-efficient super contribution for your spouse
As well as contributing to your own super fund, you could also take the opportunity to boost the super fund of your spouse, especially if they are on a low income, or not working at all.
In the 2022/23 tax year, you can claim a tax offset of 18% (up to $540 benefit) on super contributions of up to $3,000 that you make on behalf of your spouse.
To qualify for the full offset of $540, you need to contribute $3,000 or more into your spouse’s super and your spouse must earn $37,000 p.a. or less.
Not only does this help to boost the value of their fund, but you’ll also help equalise your retirement income.
5. Prepay expenses to reduce your assessable income
By prepaying deductible expenses for the 2023/24 tax year now, you can bring forward the tax deduction into the current tax year. By doing this, you will effectively reduce your assessable income.
Some examples of where prepaying expenses in this way could be advantageous for you include:
- Paying up to a year’s worth of premiums on an income protection policy held outside your super arrangement
- Paying any tax accounting fees you’re liable for in advance
- Prepaying 12 months’ interest on an investment loan.
6. Manage your capital gains and losses
If you have sold any assets – whether that be property or shares – and made a capital gain, you may want to take a look at your portfolio for any investments that are not performing well.
This is because, by selling any such investments, you can crystallise your losses and then set that loss against any gains you may have made.
Clearly you should be aware of how this decision aligns with your overall investment strategy, and not simply sell assets for tax purposes.
Note that you’re unable to re-purchase the shares you have sold for a loss after the end of the tax year, as the Australian Tax Office (ATO) consider such a transaction tax-avoidance and it could result in you being fined.
If you’re in any doubt at all, we’d strongly recommend you take advice from a tax expert.
Make sure you’re aware of the applicable deadlines
Soon after the end of the tax year, you will receive a formal statement of earnings from the ATO. You will then have until the end of October to file your tax return.
Anyone who had any taxable income in the 2022/23 tax year needs to file a return. This includes if you’re self-employed or a sole trader. In this event, you will need to provide a separate schedule outlining your business income and expenses alongside your tax return itself.
The quickest and most straightforward way to submit your return is via the ATO myTax system.
If you use a tax agent or accountant to complete your submission, you will be eligible for an extended tax return deadline.
Get in touch
If you have any queries regarding your end of tax year planning, please get in touch with us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of ATO and HMRC legislation, which is subject to change.