Tax time is right around the corner and there’s no doubt plenty of Aussies will be getting ready to submit their tax returns for the 2023-24 financial year. But there are certain things they could be doing now in the final stages that could massively benefit them.
Finance expert Ben Nash said Aussies could submit deductions for this financial year instead of waiting to do it from July 1 as they could be worth more now than in the second half of the year. This is all because of changes to Australia’s tax rates.
“Because the tax rates are reducing from next [financial] year, that means that for the rest of this financial year, tax rates are a little bit higher,” Nash said.
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“That means the value of every single dollar of tax deductions is going to be more before June 30 than it will be from July 1. So if you want to maximise your tax savings, you need to be on the ball with your tax planning.”
He claimed this is a little-known “secret” that the Australian Taxation Office (ATO) “doesn’t want you to know”. But he warned that once the window is closed it “will be closed for good”.
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Nash urged Aussies to do their homework to discover what they can legally claim and see if they can bring any deductions forward into this financial year.
But they better be quick because they only have until June 30 to get it finalised.
How you can make this ‘secret’ work for you
Tax Invest Accounting director and registered tax agent Belinda Raso explained to Yahoo Finance how you can make this tiny window of time work in your favour.
“This isn’t about buying anything additional, it’s just about the timing of the purchase,” she said.
While the tax difference may only be a couple of per cent, Raso revealed when you add up every item you need to purchase, it could work out to hundreds of dollars in savings just by buying earlier.
Buying more things won’t benefit you, but if you were planning on buying an item later this year and then claiming it back, then you should do it while the tax rate is higher.
TikToker Get Rich With Rach said you only have a few days to get those purchases done.
“If you’re an actor that had to get headshots done, you’d be significantly better off financially to do them in the next [seven] days than you were to do them in the next financial year,” she said in a video.
“Or, if you have an investment property that requires a $10,000 repair and your tax rate’s higher this year, you’re gonna get that higher percentage back versus when the percentage is lower next year.”
What are the tax rate changes coming in on July 1?
Individual income tax rates will be changing at the beginning of the new financial year.
From July 1, a person earning a wage of $73,000 will get a tax cut of more than $1,500 a year. Those earning $50,000 will pocket an extra $929 a year, while people on $100,000 will receive $2,100. Households on an average income of $130,000 will receive $2,600.
While high-income earners will also get a tax cut, it won’t be as much as initially expected. Those who are earning $200,000, their tax cut will be slashed from $9,075 to $4,500.
The federal government is reducing the 19 per cent tax rate to 16 per cent and the 32.5 per cent tax rate to 30 per cent.
It is retaining the 37 per cent tax rate but increasing the threshold from $120,000 to $135,000, and retaining the 45 per cent tax rate but increasing the threshold from $180,00 to $190,000.
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