Another financial year done and dusted. Well, almost!

With a little more than two weeks to go until June 30, it is high time to get in some last-minute tax planning.

Budget changes and the upcoming tax cuts have made it more important than ever to get your finances in order for the end of the tax year.

As we approach the 30^th June, here are a few simple strategies guaranteed to put cash back in your pocket:

TIP 1 – PERSONAL INCOME TAX SCALES: 2012-2013 AND BEYOND

2011-12		2012-13 & 2014-15		2015-16 & BEYOND
THRESHOLD ($)	MTR (%)	THRESHOLD ($)	MTR (%)	THRESHOLD ($)	MTR (%)
0-6000	0	0-18,200	0	0-19,400	0
6001-37,000	15	18,201-37,000	19	19,401-37,000	19
37,001-80,000	30	37,001-80,000	32.5	37,001-80,000	33
80,001 – 180,000	37	80,001 – 180,000	37	80,001 – 180,000	37
> 180,000	45	> 180,000	45	> 180,000	45
The Medicare Levy will be added where applicable

If you are earning less than $80,000, the good news is you can look forward to a tax cut next year. From July 1, the tax-free threshold will be trebled from $6,000 to $18,200, resulting in tax cuts of up to $600 for lower-income earners.

However the downside is that the current 15 per cent and 30 per cent marginal tax rates will increase (see table above) to ensure the tax cuts only go to those on lower-income levels.

People earning less than $80,000 will be paying higher marginal tax rates (though less tax overall) from July 1 and so will get more ”value” for deductions next year.

 

TIP 2 – PREPAY PRIVATE HEALTH INSURANCE

If you’re likely to be hit by the new means test on the tax rebate for private health insurance, you should consider prepaying next year’s premium before June 30.

”The Tax Office put out a ruling in 2004 that says you get the benefit of the rebate in the year you pay the premium”. So if you pay now, you should still be eligible for the full rebate. If you’re likely to get a lower rebate next year or miss out, prepaying is well worth considering.

Health insurers are confident they can pass on the rebate in the form of lower premiums for prepayments but both Medicare and the Tax Office have indicated they have not yet confirmed how they’ll handle prepayments in light of the new legislation. Some insurers are even offering the ability to prepay for up to 18 months.

We suggest that you contact your Health Insurer immediately.

 

TIP 3 – MAXIMISE MEDICAL EXPENSES

For those of you that have incurred a lot of out-of-pocket medical expenses this year, it would be worth stocking up on pharmaceuticals or getting that dental work done before June 30.

The net medical-expenses rebate, which currently allows you to claim a 20 per cent tax offset on out-of-pocket medical expenses above $2,000 (for you and your family), will be means-tested from July 1 – so you may find it harder to access next year.

The means test will apply to people with adjusted taxable incomes in excess of $84,000 for singles and $168,000 for couples.

For these taxpayers, the offset next year will only be available on out-of-pocket expenses in excess of $5,000 and it will be reduced to 10 per cent.

 

TIP 4 – MAXIMISE CONCESSIONAL SUPER CONTRIBUTIONS

If you have the cash flow, it makes sense to look at making deductible or concessional super contributions before June 30, especially if you’re over 50 or earning more than $300,000.

From July 1, the limit on concessional contributions for those aged 50 or more will halve to $25,000 and people earning more than $300,000 will pay 15 per cent extra tax on their concessional contributions, lifting their contributions tax rate to 30 per cent.

”If you’re over 50 it may be your last chance, at least for a while, to make a $50,000 contribution.”

For those of you expecting a bonus but haven’t yet had the amount confirmed, sacrificing part or all of it may be possible.

Anyone making extra contributions should ensure they don’t exceed the current caps of $25,000 for those under 50 and $50,000 for those aged 50 or over. Any extra is treated as an excess contribution and taxed at the top marginal rate.

Also, all employees over 50 should also review their salary-sacrifice arrangements for next year to ensure they’ll stay within the new caps.

 

TIP 5 – BRING FORWARD ELIGIBLE TERMINATION PAYMENTS

Changes to the treatment of termination payments from July 1 provide a strong incentive for many people faced with redundancy to take the money before June 30.

Transitional rules relating to employment contracts that were in place in May 2006 currently allow you to roll the payment into super or be taxed at lower rates. Those rules end on July 1.

The government also announced tougher tax rules for ”golden handshakes” from July 1 that provide a big incentive to take these payments before then.

 

TIP 6 – GET THE SUPER CO-CONTRIBUTION

This year is your last chance to get up to $1,000 of free money from the government if you make a non-deductible super contribution and claim the government co-contribution. Next year, the maximum co-contribution is being halved to $500.

Many middle-income earners will also miss out on the benefit next year. At the moment, you can claim the full $1,000 co-contribution if you earn up to $31,920 and a partial co-contribution if you earn up to $61,920.

But next year that upper-income limit will fall to $46,920.

 

TIP 7 – OTHER SUPER STRATEGIES

If your spouse earns less than $13,800, you might want to consider making a spouse contribution to their super. You can claim a maximum rebate of $540 on a $3000 contribution if they earn less than $10,800. Part of the money could also be used to buy insurance for them in a more tax-effective way than buying it direct.

 

TIP 8 – PRE-PAY EXPENSES

If you have a geared investment, it is worth considering pre-paying next year’s interest to gain an immediate tax deduction – especially if you’re paying the flood levy this year.

You can also get a deduction now by pre-paying next year’s income protection insurance premiums.

”Many people don’t even realise income-protection insurance is deductible.”

 

TIP 9 – MANAGE CAPITAL GAINS

If you’ve made a capital gain this year, review your portfolio to see whether it is worth realising a capital loss to offset the gain.

”You can’t carry losses back. So if you’ve made a capital gain, you may want to trigger a loss to offset it against.”

However, you can’t just sell an asset to trigger a loss, then buy it back. The Tax Office regards this as a form of tax avoidance – known as a wash sale – and has been focusing on picking such sales up in recent years.

 

TIP 10 – PREPARE NOW

It is important to get your paperwork together and consult us before June 30 if you require further assistance.

There may be further measures you can take now to reduce the bill when tax time comes