The tax man cometh

Mar 09, 2013

March is the month to start getting tax-ready, writes Karina Barrymore.

There may be three months to go before the end of the financial year, but it's actually March when the really money-savvy fine-tune their finances for tax time.

Despite the weather still being warm and the beach or backyard beckoning, March is the best time to plan for that looming mid-winter tax deadline. Leave it any longer and there's usually very little major rejigging you can do.

To help start the cogs turning, we asked our experts what we should be doing now to minimise this year's tax bill.

Pre-pay

"While pre-paying 12 months of expenses -- such as interest on a rental property loan -- is something that can be done in the last week of June, you need to start making plans now,'' says accountant Adrian Raftery, founder of Mr Taxman.

"First you need to make plans to have the cash available, second, you need to arrange the pre-payment with your bank,'' he says.

"If you are likely to get a bonus, or are planning to realise a capital gain next financial year, which will take you into a higher tax level, also consider pre-paying 12 months' worth of private health insurance this year, as the 30 per cent rebate is phased out as your income grows,'' he says.

Accountant and RSM Bird Cameron business specialist Andrew Graham also suggests bringing forward some business expenses into this financial year.

"Consider items like training, repairs, maintenance or pre-paying some interest,'' he says. ``The $6500 instant asset write-off also commenced this year, so business may consider bringing forward any capital expenditure.''

Car expenses

"Work-related vehicle deductions are always one of the biggest claims made each year and invariably the biggest claims are made when people maintain a 12-week log book. So don't leave it too late to do your log book and therefore miss out on easy and legitimate refunds,'' Mr Raftery says.

"Make sure you keep your receipts for running costs for the whole year, so why not start summarising those pesky petrol receipts now.''

Superannuation

THIS is another can of worms this year, as the superannuation rules keep changing, including the co-contribution,
contribution tax rate and the contribution cap this year.

According to DBA Lawyers superannuation expert Bryce Figot, many people are in danger of being caught by the cut to contribution limits from $50,000 to $25,000 for over 50 year olds.

"Make sure you don't accidentally go over the cap, which can result in being hit with up to 93 per cent tax,'' Mr Figot says.

"Check your contributions now, especially if you have salary sacrifice arrangements in place that might have been automatically set at the higher levels,'' he says.

The lawyer also says anyone planning to put listed securities into a self-managed super fund, can do this before July 1 as an off-market transfer.

Next financial year this has to be done on-market which will incur brokerage, he says.

Medical

If you've had a tough year health-wise and have paid a lot of medical expenses, it might be worthwhile bringing forward even more costs such as dentists, glasses or elective surgery for anyone in the family before June 30, Mr Raftery says.

You can claim against out of pocket medical expenses above $2120 in any year, so lumping these costs all into one year can make it more worthwhile.

High-income earners, however, have had this benefit cut this year, to only costs above $5000.


THIS YEAR TOP 10 TAX CHANGES TO WATCH


1 Income tax rates fall slightly this year, with the greatest benefit for low-income earners.

2 Small businesses can now claim an immediate write-off for new business assets that cost less than $6500.

3 Superannuation contribution caps have been halved to $25,000 for over 50-year-olds, who should be careful not to go over the limit.

4 The private health insurance rebate is now means tested. It will start to phase out for singles who earn more than $84,000 and couples earning more than $168,000. It cuts out completely for singles on more than $130,000 and couples on more than $260,000.

5 Superannuation contribution tax has been doubled to 30 per cent for people who earn more than $300,000.

6 For the first-time, building and construction companies must report the total payments made to each contractor.

7 The Medicare levy tax surcharge has increased from 1 per cent to 1.5 per for singles earning more than $130,000 and couples earning $260,000 who do not have private hospital cover.

8 Out-of-pocket medical expenses offset will be means tested. Couples earning less than $168,000 can claim a rebate for expenses above $2000. Couples earning more than $168,000 can now only claim a rebate for expenses above $5000. The rebate has also been halved to 10 per cent.

9 The superannuation co-contribution from the government for lower-income earners has halved to $500 and the cut off threshold has been reduced from $61,900 to $46,900.

10 Companies and businesses are now allowed to carry-back tax losses of up to $1 million from last year.

Source: www.MrTaxman.com.au

 

This article first appeared in the Herald Sun, Saturday 9 March 2013, p.36.

Tags: 101 WaysAccountant SydneyCompany taxPersonal taxSuper

Author: Karina Barrymore

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