Tax time 2024: Top tips for investors and business owners
A tax time windfall awaits for investors and small business owners who follow these experts’ end-of-financial-year tips.
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Investors and small business owners have less than a fortnight to make smart and powerful money moves in the next fortnight if they want maximise their tax refund for 2023-24.
Australia has 2.2 million residential real estate investors, 2.6 million small business owners and an estimated 7.7 million shareholders, and many miss out on money because of mistakes and myths around tax time.
These tips can help deliver the biggest refund possible, but in many cases you will need to act before June 30.
1. LANDLORDS’ BIG FIVE
Real estate investors should know their tax-deductible expenses.
There are many common deductions and the biggest are usually investment loan interest, property manager fees, depreciation, council rates and landlord insurance. Other big bills can include land tax, strata fees and repairs and maintenance.
Check the Australian Taxation Office’s Rental Properties guide on ato.gov.au for more information.
BMT Tax Depreciation chief executive officer Brad Beer said a about three quarters of property investors did not maximise their tax deductions.
2. DEPRECIATION ISN’T DONE
Rule changes by the Coalition government in 2017 removed property investors’ ability to claim depreciation of carpets, curtains and other items that they did not buy new. This prompted many investors to wrongly think getting a depreciation report was unnecessary for anyone buying property second-hand.
However, investors can still claim depreciation on new items, renovations and construction costs, known as a capital works deduction. This deduction alone is typically 2.5 per cent of a property’s building cost each year – often $5000 or $10,000.
Cheap online depreciation schedules may cost less than $300 but you get what you pay for, while a comprehensive report will cost $400-$800, which is tax deductible.
“If you are buying a depreciation schedule, we say buy and pay for it in June not July because you get to claim the tax deduction for this financial year,” Mr Beer said.
“You can go back an amend two years of previous tax returns,” he said.
3. PREPAY INVESTMENT COSTS
Mr Beer said repairs and maintenance on an investment property could be brought forward to pay now so the deduction could be claimed for 2023-24.
Investors who expect to earn less income next financial year could consider prepaying a year’s interest on their investment loan, bringing forward that deduction. Savvy investors often pay their annual landlord insurance policy in June.
People who borrowed money to invest in shares or other assets also can prepay interest a year in advance.
4. CAPITAL GAINS AND LOSSES
Sold an investment property, shares or cryptocurrency for a big profit? That means you’ll have a capital gain, where the profit is added to your taxable income in the year the asset is sold. If you’ve held the asset for more than 12 months, only half the gain gets added to your income.
CreationWealth senior financial adviser Andrew Zbik said there were investment strategies that could reduce your capital gains tax liabilities.
“Voluntary super contributions are tax-deductible, and if you have a large capital gain this financial year, they can offset the gain,” he said.
This strategy could be turbocharged by catch-up super contributions, where people can inject even more into super if they did not use their full $27,500 annual contributions cap in previous years.
5. DON’T FORGET DEBT
While pumping extra money into super could offset capital gains elsewhere through a tax deduction, many investors might be better off paying down their mortgages, Mr Zbik said.
“It’s a good one for people who have surplus savings and don’t have to pay down any debt,” he said of the super strategy.
“But given the higher interest rates, if you have non-deductible housing debt, just focus on paying that down.”
6. TIMING IS EVERYTHING
If you’re about to sell an asset for a capital gain, consider waiting until July so you don’t have to pay CGT on it until after July 2025.
Similarly, loss-making investments can be sold before June 30 to offset capital gains, but they can’t offset other taxable income.
Small business owners, too, can time their sales and purchases around the end of financial year.
“Think about what expenses could you prepay in this financial year,” Mr Zbik said.
MYOB executive general manager SME Emma Fawcett said making purchases in June could be a smart move for business owners looking for a quick turnaround from payment to tax refund.
“EOFY sales might also be a good time for small businesses owners to snap up a bargain on larger purchases, such as a new piece of equipment they’ve been saving for,” she said.
7. ASSET ACTION
Ms Fawcett said the $20,000 instant asset write off scheme was an excellent opportunity for business owners to maximise their tax refund while buying a high-value item.
“Businesses with an annual turnover of less than $10 million can claim an instant deduction of the full value of assets that cost less than $20,000,” she said.
“We’re hoping to see this legislated in the coming week so SMEs can take advantage of it.”
8. BUSINESS CLEAN-UP
Dr Raftery said business owners could scrap obsolete stock and write off bad debts.
“Got some old plant or stock that your business simply can’t sell?” he said.
“Then physically write it off before 30 June and get a tax deduction for it this year. You can value trading stock at the lower of actual cost, replacement cost, or market selling value.”
Bad debts that were originally shown as income could potentially be written off before June 30, Dr Raftery said.
9. INCOME -SPLITTING WITH SPOUSES
“It amazes me how many smart business people are really dumb when it comes to reducing tax,” Dr Raftery said.
“Too often I see them paying 47 per cent tax on income, which could be put under their lower-taxed spouse or company,” he said.
“If you are paying a wage to your spouse from your business, ensure that you can justify the amount paid based on the time and the skillset required.”
10. GET A GOOD ACCOUNTANT
Rules and taxes for investors and business owners are confusing and constantly changing, so professional advice is vital.
“Great accountants are like surveyors … they know where the boundaries are,” Dr Raftery said. “And their fees are tax deductible!
Cooking up tasty tax deductions
Small business owner Alice Bennett, founder of cake-baking business Miss Trixie Drinks Tea, said she had a solid network to support her business and tax decisions.
“Depending on the needs of the business, I might look at tax time deals for equipment or other investments I need to make,” she said.
“It can be a good time to get a bargain. Typically, I’d be deducting expenses such as ingredients and packaging.”
Ms Bennett said keeping good records was helpful “so tax time isn’t a scramble”.
She said she was adapting to meet today’s tougher economic environment.
“The post-pandemic cash splashing has well and truly run out of steam.
“The cost of ingredients has gone through the roof, meaning our butter isn’t going as far as it used to, so we’ve had to innovate and be creative to make the finances work. We launched a merch line, which sold out.”
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