Straight Numbers & Tax Talk for Individuals – June 2017

posted in: Newsletter

In this Issue:

It’s tax time again, so this month we’ve included an article about common tax claims by individuals and information on allowable, tax deductible expenses this year.

It’s an easy reference guide to help you work out what saving strategies you can apply this year.

Make sure to also check the article on super changes in this newsletter that may require action before 1 July this year.

If you are not quite sure what items you can claim in your tax return, we’re always happy to help.

Visit our Personal Tax page  to make an appointment with us, or call us direct on 07 3399 8844.

Should you have any questions about the items published in this newsletter, please don’t hesitate to give us a call on 07 3399 8844… or stop by at our office for a coffee. We’re never too busy to sit down and talk to you.

Best regards from the Team

 

 

 

Tax saving strategies prior to 1 July 2017

A good strategy to reduce tax payable is normally to accelerate any income tax deductions into the current income year, which will reduce overall taxable income in the current year.

The tax rates for resident (adult) individual taxpayers for the 2016/17 income year are as follows:

Taxable Income threshold
0 – $18,200
$18,201 – $37,000
$37,001 – $87,000
$87,001 – $180,000
$180,001 and over

Tax payable1
Nil
19% of excess over $18,200
$3,572 + 32.5% of excess over $37,000
$19,822 + 37% of excess over $87,000
$54,232 + 47%2 of excess over $180,000

  1. The Medicare levy of 2% generally applies in addition to these rates.
  2. This rate includes the 2% ‘Temporary Budget Repair Levy’ which applies from 1 July 2014 to 30 June 2017 on that part of a person’s taxable income that exceeds $180,000.

Common claims made by individuals

The following outlines common types of deductible expenses claimed by individual taxpayers, such as employees and rental property owners, plus some strategies that can be adopted to increase deductions for the 2016/17 income year.

1. Depreciable plant, etc, costing $300 or less

Salary and wage earners and rental property owners will generally be entitled to an immediate deduction if certain income-producing assets costing $300 or less are purchased before 1 July 2017.

Some purchases you may consider include:

  • books and trade journals;
  • briefcases/luggage or suitcases;
  • calculators, electronic organisers;
  • electronic tablets;
  • software;
  • stationery; and
  • tools of trade.

2. Clothing expenses

Purchase or pay for work-related clothing expenses prior to the end of the income year, such as:

  • compulsory (or non-compulsory and registered) uniforms, and occupation specific and protective clothing;
  • other expenses associated with such work-related clothing, such as dry cleaning, laundry and repair expenses.

3. Self education expenses

Consider prepaying the following self education items before the end of the income year:

  • course fees (but not HECS-HELP fees), student union fees, and tutorial fees;
  • interest on borrowings used to pay for any deductible self education expenses.

Also bring forward purchases of stationery and text books (i.e., those which are not required to be depreciated).

4. Other work-related expenses

  • Employees can prepay any of the following expenses prior to 1 July 2017:
  • union fees;
  • subscriptions to trade, professional or business associations;
  • magazine and newspaper subscriptions;
  • seminars and conferences;
  • income protection insurance (excluding death and total/permanent disability).

Note: When prepaying any of the expenses above before 1 July 2017, ensure that any services being paid for are to be provided within a 12 month period that ends before 1 July 2018. Otherwise, the deductions must generally be claimed proportionately over the period of the prepayment.

Super changes may require action by 30 June 2017!

Due to the introduction of the new ‘transfer balance cap’ from 1 July 2017, super fund members with pension balances (in ‘retirement phase’) exceeding $1.6 million will need to partially commute one or more of their pensions to avoid the imposition of excess transfer balance tax.

In addition, members in receipt of a transition to retirement income stream (‘TRIS’) will lose the pension exemption from 1 July 2017.

This means that the future disposal of any assets currently supporting such pensions will potentially generate a higher taxable capital gain (even though the disposal of the asset prior to 1 July 2017 could be fully or partially tax-free, depending on whether the asset is a segregated or unsegregated asset).

Fortunately, to avoid funds selling off assets before 1 July 2017, transitional provisions have been introduced to allow super funds to apply CGT relief in certain situations.

Although the choice to apply the CGT relief can be made up until the day the super fund is required to lodge its 2017 tax return, in many cases, action must be taken on or before 30 June 2017 for the fund to even be eligible to make that choice.

In particular, funds calculating exempt pension income using the segregated assets method will generally need at least a partial commutation of the pension.

Editor: Please contact our office if you need any information regarding the super reforms, including what needs to be done to obtain CGT relief (if necessary), whether a TRIS should be commuted to accumulation phase or continued into the 2018 year, and how the new contribution rules will affect contributions in both the current and future years.

FREE Copy of Our Book

We hope that you’ve enjoyed this edition of the Straight Numbers & Tax Talk.

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Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.