As you plan for the end of financial year, a good strategy to reduce the amount of tax payable is to accelerate any income tax deductions into the current year. In general terms, this means prepaying expenses in this financial year so you can claim the deduction now and reduce your overall taxable income in the current year.
Here are some examples of expenses that you may consider prepaying by 30 June 2018:
- Salary and wage earners as well as rental property owners will generally be entitled to an immediate deduction if certain income-producing assets costing $300 or less are purchased before the end of financial year. Such purchases may include:
- books and trade journals;
- briefcases/luggage or suitcases;
- calculators, electronic organisers;
- electronic tablets;
- stationery; and
- tools of trade.
- Employees can also prepay any of the following expenses prior to the end of financial year:
- union fees;
- subscriptions to trade, professional or business associations;
- magazine and professional journal subscriptions;
- seminars and conferences; and
- income protection insurance (excluding death and total/permanent disability).
If you decide to prepay any of the above expenses before 30 June 2018, you should keep in mind that any services being paid for must be provided within a 12 month period that ends before 1 July 2019. If the services are not provided within this period, the deduction generally has to be claimed proportionately over the period of the prepayment.
As always, we are happy to help you assess how this strategy may apply to your individual circumstances. If you are unsure about whether you can utilise this strategy on a particular expense you are considering prepaying before the end of financial year, please contact us.
[Originally posted on the OakWealth Blog]