2024 EOFY Tips to reduce tax and plan for Stage 3 Tax cuts

As the end of the financial year approaches, people are usually pretty keen to find effective strategies to minimize their tax liabilities. This financial year ending June 30 2024, is particularly important for managing your deductions with the new Stage 3 tax cuts coming into effect from 1 July 2024.

Stage 3 Tax Cuts

As the end of the financial year approaches, people are usually pretty keen to find effective strategies to minimize their tax liabilities. This financial year ending June 30 2024, is particularly important for managing your deductions with the new Stage 3 tax cuts coming into effect from 1 July 2024.

From 1 July 2024. The tax cuts will:

  • reduce the 19 per cent tax rate to 16 per cent
  • reduce the 32.5 per cent tax rate to 30 per cent
  • increase the threshold above which the 37 per cent tax rate applies from $120,000 to $135,000
  • increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000

New personal tax rates and thresholds for 2024–25 onwards

2023-242024-25
Thresholds ($)Rates (%)Thresholds ($)Rates (%)
0 – 18,200Tax free0 – 18,200Tax free
18,201 – 45,0001918,201 – 45,00016
45,001 – 120,00032.545,001 – 135,00030
120,001 – 180,00037135,001 – 190,00037
Over 180,00045Over 190,00045

Source: treasury.gov.au

Should I claim more deductions in this financial year?

With the lower tax rates and widening of the middle thresholds, this means that any deductions made in this financial year will be more valuable. For example, if you are in the $45,001-$120,000 bracket, your deductions are 2.5c on the dollar more valuable in this financial than the next.

It would then make sense, if you have the ability to do so, to maximise your deductions in this financial year and you may wish to even bring forward some deductions. This blog has been written to give some tips on how you may be able to maximise your deductions in this financial year.

1. Maximise Tax-Deductable Superannuation Contributions

Contributing to your superannuation is a smart way to reduce your taxable income while boosting your retirement savings. Australians can make concessional (before-tax) contributions, which include employer contributions and salary sacrifice amounts, up to a cap of $27,500 per financial year. These contributions are taxed at a lower rate of 15%, which can be advantageous compared to your marginal tax rate.

Further to this, you may even want to consider using your catch-up concessional contribution cap.

Unused concessional contributions, or more simply the different between your concessional contributions and the Concessional cap in the financial year, accrue and carry forward for use in subsequent financial years. These catch-up contributions accrue from FY2018/19, and expire on a rolling 5-year period.

For example, this financial year is your final year to be able to use the FY2018/19 unused cap. This might be further incentive to make a larger concessional contribution in this financial year.

An example of this is illustrated in the table below;

Financial yearCCs madeGeneral CC cap for yearUnused amount for financial yearUnused amount that can be carried forward
2018/19$15,000$25,000$10,000$10,000
2019/20Nil (maternity leave)$25,000$25,000$35,000
2020/21$15,000$25,000$10,000$45,000
2021/22$20,000$27,500$7,500$52,500
2022/23$20,000$27,000$7,500$60,000

Source: mlc.com.au

Note: In order to be eligible to make Catch-up concessional contributions, you must have a total super balance (TSB) below $500,000 at the prior June 30.

 2. Take Advantage of Tax-Deductible Expenses

Claiming eligible work-related expenses can reduce your taxable income. Keep track of expenses such as home office costs, work-related travel, uniforms, and professional development courses. Make sure to keep detailed records and receipts to substantiate your claims.

If you need to make a work-related purchase, you may decide to bring this purchase forward in order to claim the deduction in this financial year.

3. Prepay Expenses and Interest

Prepaying certain expenses before the end of the financial year can help you bring forward deductions. This is particularly beneficial for small business owners and investors. Expenses such as insurance premiums, subscriptions, and interest on investment loans can often be prepaid, providing immediate tax relief.

If you have an investment loan on an investment property or share portfolio, you could consider paying the next 12 months interest in advance. Usually you would need to have a fixed rate loan where the interest will be predictable and you would need to discuss with your bank if this is something they can facilitate.

This can work particularly well if you have had an unusually high taxable income in the current financial year and have the capital available.

Final Thoughts

By implementing these tax-saving strategies before June 30, you can maximize your tax savings and ensure you are not paying more tax than necessary. Remember, it’s crucial to keep accurate records and consult with a tax professional to ensure you are compliant with all tax laws and regulations.

Disclaimer: The information in this article is general and does not take into account your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken and refer to the relevant Product Disclosure Statement before investing in any product. P3 Financial Planning Pty Ltd ABN 61 009 883 292 AFSL 464628