End of Financial Year Tax Issues

2014 presents high income earners with some unique challenges due to changes announced in the Federal Budget that are as yet unlegislated tax law, in addition to the introduction of the 2% budget repair levy on 1 July 2014.

BAQ members must decide between:

• bringing forward expenses to reduce this year’s tax; or
• claiming the expenses in 2015 when the top marginal tax and levies will be 2.5% higher.

Members with incomes above $180,000 will need to consider their cost of funding to assess whether bringing forward deductions to this year with a top tax rate of 46.5% is more effective than reducing tax one year later at 49%.

Should you elect to minimise tax in the 2014 year there are a number of tax and superannuation initiatives worth considering.  Please refer to our comprehensive Year End Tax and Superannuation Planning Guide for all the details.

Key tax and superannuation planning opportunities for BAQ members to consider include:

• Some expense prepayments will be available to BAQ members in the year they are paid, such as investment loan interest (12 months in advance only), insurance premiums etc.
• If you purchased a new car in 2013/14 year, you may be able to claim the first $5,000 as an expense this year.  However, please note for cars purchased after 1 January 2014 that this deduction may be repealed when put before a new Senate on 1 July 2014.  Amendments without penalty will be required if that occurs.
• If you have a Discretionary Trust for income streaming, consider which beneficiaries of your Trust will be presently entitled to the income or capital of the trust on or before June 30.  A written direction should be made by 30 June.  Failure to do so may result in income tax at the highest marginal tax rate in the Trust.
• If you are aged 60 or more you may make concessional superannuation contributions that are tax deductible up to your cap of $35,000.  Also if you were at least 59 on 30 June 2013 i.e. you will be 60 before 30 June 2014, you can also contribute up to $35,000 as a concessional contribution.  For all others under aged 60 the concessional contribution cap is $25,000.   If you decide to contribute pre-tax income into your superannuation fund up to these limits the contributions will be tax deductible to you and taxed at only 15% within the superannuation fund. 
• Barristers who are earning more than $300,000 per financial year should be aware of an additional 15% contributions tax levied on contributions of certain high income earners.  This is called ‘Division 293 Tax’, if you would like additional information on how this affects your financial situation please contact us.  Briefly, if you are paying tax at the top marginal tax rate on 46.5% a 30% tax on deducted contributions still constitutes a tax saving of 16.5%. 
• If you have decided or have been advised to make substantial non-concessional contributions to superannuation, carefully consider the timing of this.  The annual non-concessional contribution (NCC) limits are increasing on 1 July to $180,000 up from $150,000 and therefore using the “bring forward rule” superannuants under age 65 can make 3 x the annual NCC limit in any one 3 year period.  Using the “bring forward rule” before June 30 you’ll have a limit of $450,000, delaying it until 1 July you’ll have a limit of $540,000. 

If you require personal advice on any of these planning opportunities please contact Tim Taylor or Jamie Towers on 07 3218 3900 at Hanrick Curran on matters of Tax and Andrew Fleming or Michael Borjesson at Wilson HTM who are AFS licensed on matters of Superannuation on 07 3212 1326.

Book now to schedule your Pre FYE Tax, Superannuation or Investment Review.  Identify other opportunities you could be actioning before 30 June to improve your after tax position by speaking with Hanrick Curran and Wilson HTM Advisers.  Contact Hollie Spencer to arrange a time with our experts.