With all 13.6 million Australian taxpayers set to receive a tax cut in the new financial year, now is a good time to assess finances and take steps to manage tax liabilities, says Peter Bardos, tax director at HLB Mann Judd Sydney.

“The changes to the personal tax rates from 1 July 2024 mean that anyone whose income levels are unchanged will pay less tax next financial year than they are paying this year. As a result, it makes sense to bring forward any deductions and apply them to this year’s taxable income, and push back any income into next financial year if they can.  

“For example, this could mean selling shares on 1 July rather than 30 June, so the income is taxed at the lower rate in the next financial year.  Other deductions could include subscriptions or memberships, professional development courses or education, or charitable donations.”

Another area to be aware of is that this is the last year people can take advantage of the “carry forward” rules on unused super contribution concessions from the 2018-19 financial year.

“From 1 July, any unused concessional contribution caps from the 2018-19 financial year will expire.  This is the first time we have reached the point where the cap will expire so it may catch some people by surprise.

“Those planning to carry forward their unused caps must make sure they do so well before 30 June, as the money must appear in their super fund before the end of the financial year, not just get transferred by that date.  It can take a few days for the transfer to get processed so it’s important to leave enough time.  In addition, the relevant notices from the super fund must have been received before a tax return can be completed, so timing is very important,” Mr Bardos says.

He adds that as the Australian Tax Office’s (ATO) data-matching capabilities continue to improve, people should also be aware of the ATO’s new areas of interest.

“We are seeing the ATO increasingly talking about areas that, in the past, weren’t really worth its while to chase,” Mr Bardos says.  “However, better data and technology is making it easier and cheaper for the ATO to crack down on certain behaviour.

“People should be aware that just because they got away with things in the past, doesn’t mean they will get away with it this year and indeed, the ATO has flagged some areas that it will be focusing on.”

One such area is shareholder loans, where a shareholder has borrowed money out of their private company during the year and then repays the “loan” just prior to 30 June, thus reducing their tax payable.  They then take the money back out the company shortly afterwards.

“There may be valid reasons why people need to borrow money from the company, but the repayment must be genuine and if it suddenly appears back in the shareholder’s account a few days’ later, the ATO’s data-matching capabilities mean it could come to their attention.

“The simple advice here is – don’t do it,” Mr Bardos says. “If it is a valid withdrawal from the company then people should declare it as a dividend, or they should set up a repayment schedule over a period of time.”

Another area where the ATO’s patience has worn thin is where people make payments from a family or discretionary trust to their children.

“If the money isn’t appropriately set aside for the children or transferred into the child’s bank account, then the ATO may start asking questions,” Mr Bardos says.

“It’s likely that, as technology continues to improve – including through AI – the ATO will become more efficient at identifying even small breaches and has made it very clear that it will be monitoring taxpayer behaviour very closely.”

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