The end of the financial year, 30 June 2024, is approaching fast, however, it’s not too late to consider implementing a few practical tips that might reduce your tax bill or even increase your 2024 tax refund.
Not all of the following tips will necessarily apply to you, but at least by reviewing them you may be able to be improve your, and your family’s, tax position as we enter the new financial year.
Now is the best time to organise any documentation you’ll need in preparing your 2023-2024 tax return. That includes bank and investment statements (including for shares and exchange traded funds (ETFs), investment property records, and receipts for donations, work expenses and large medical costs.
Getting organised in advance of year end will mean that you’ll be in a position to lodge your tax return as early as possible. This is certainly something you should be aiming to do if you’re entitled to a 2024 tax refund.
A word of warning…the Australian Tax Office (ATO) will pre-fill your online draft tax return with income (such as interest) that you’ve received from financial institutions, such as banks. This information is sent to the ATO as soon as possible after 30 June and should be loaded within a few days. However, it’s important to remember that if you lodge too early, your pre-filled return may not align with your personal records. Don’t assume that you can choose the lower amount shown in the ATO draft.
It’s your responsibility to disclose the correct amount, so waiting a while after 30 June to make sure your records and those of the ATO are in agreement is a wise thing to do. There’s no point in risking fines, penalty interest and stressful correspondence with the ATO. You can learn more about pre-filling of tax returns on the ATO website.
Consider pre-paying certain tax deductible expenses before 1 July. These might include donations to charities, professional subscriptions and certain legitimate work-related expenses.
The ATO website has a comprehensive list of work-related expenses that ADF members may claim. The list includes the conditions under which expenses can be claimed, including any required documentation. We recommend that you should review the list just in case you’ve overlooked something.
It’s important to remember that if you make a claim for a work-related expense, you must have spent the money, you must not have been reimbursed and the expense must directly relate to the earning of your income.
These criteria sound obvious enough, but many people who have not met them are identified by the ATO every year. They include people who have not actually spent the money by 30 June (or at all!) and people who have not ensured that the expense has gone through their bank account by the end of the financial year.
Many ADF members and their families own an investment property. If you’re in that fortunate position, you should think about pre-paying certain costs by 30 June, such as strata fees, pest control, insurances, repairs and even some of next year’s interest. Claims against rental income arising from investment properties are under constant surveillance by the ATO so it’s important to get them right as you can see from this statement by them:
“We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties……this year we’re particularly focused on claims that may have been inflated to offset increases in rental income….performing general repairs and maintenance on your rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (like initial repairs on a newly purchased property and improvements during the time you hold the property) and are not deductible as repairs and maintenance”.
The ATO website has a detailed section on tax deductible claims you can make as the owner of an investment property.
Claims for working from home have become more common since the Covid pandemic. The rules/methods for making these claims have changed over the years which (depending on your circumstances) may improve your tax position.
For example, you are no longer required to have a dedicated office space in your home in order to justify a tax deductible claim. However, the rules concerning actual hours worked have tightened, so you’ll need to consider whether your record keeping is adequate.
You can find out more about working from home expenses on the ATO website.
Here are three ways you can save tax and/or improve your family’s superannuation position by the end of the financial year:
If you’ve sold any personal assets during the year ending 30 June 2024, such as an investment property or shares, any gains will most likely be subject to Capital Gains Tax (CGT). A way to reduce the potential liability is to sell a poorly performing asset against which any capital loss can be applied to reduce (or even extinguish) the gain on which CGT is applied.
Of course, it may not be wise to buy or sell an asset purely for tax reasons. There may be other issues to consider, including the long-term purpose and value of an asset in your investment portfolio (such as its possible future use as your family home or as accommodation for children).
It’s also worth remembering that you shouldn’t assume you can simply buy back in July the assets you’ve sold at a loss in June. That action may well be considered by the ATO as an illegal tax evasion strategy. The issues in this paragraph may need advice from a licensed financial adviser and/or a registered tax agent (more on this below). You can read more about CGT on the ATO website.
If you and your family are running a small business (with a turnover of less than $10 million per annum), you may be able to claim an immediate tax deduction in the year ending 30 June 2024, for the full amount of all capital purchases costing no more than $20,000. Naturally, “conditions apply”. Full details and conditions are outlined on the ATO website.
Tax can be complex, so there’s a lot to be said for using the services of a registered tax agent (RTA) to prepare your tax return, or to at least seek advice on some of the technical issues raised in this article. There is a public register of RTAs maintained by the Australian Government’s Tax Practitioners Board. Most RTAs are qualified accountants, but not all qualified accountants are RTAs.
You might also consider seeking wider strategic investment/wealth/financial planning advice from a licensed financial adviser. Before you do that, we recommend reading the Getting Financial Advice section of our website which contains a link to licensed financial advisers who only charge on a fee for service basis (no commissions or percentage-based fees).
The key points here are to make sure that the person you consult is appropriately qualified and that before you proceed, you should have a clear understanding of the scope and cost of the advice you’re seeking.
There seems to be a considerable misunderstanding in the Australian community (at least in the general media) about the meaning of the terms tax return and tax refund.
So just to be clear about this monumental issue, a tax return is the annual document that every taxpayer is required to lodge with the ATO, whereas a tax refund is the amount of money that the ATO sends you if you’ve paid too much income tax, often as a result of successfully making the types of claims in your tax return that are outlined in this article on maximising your tax refund.
So who cares? Very few people it seems, however, the issue is briefly canvassed in the ATO Community chat website.
At least we’ve cleared that up.
Super can be much harder to quantify if you are a member of MSBS or DFRDB, known as defined benefit schemes. This is because the bulk of your super benefit will likely be in the form of a lifetime indexed pension, based on your years of service and final average salary. The longer you stay in Defence, the larger your lifetime pension. This cannot easily be compared to a standard accumulation super fund. Please contact the Commonwealth Superannuation Corporation (CSC) for an estimate or your current benefit.
If you have an accumulation super fund, like ADF Super, it’s much easier to compare the superannuation you get from Defence with that of a civilian employer. Generally employers pay super at a rate of 9.5% of your ordinary salary and allowances, Defence pays super to accumulation fund members at a rate of 16.4%, well above the minimum requirement.
You may not appreciate the value of your generous superannuation benefits now, but you certainly will in years to come.
ADF members receive, statutory death and invalidity cover, and rehabilitation services if needed. To replace this cover in civilian employment, you may need to take out personal insurance, such as death, disability, trauma and income protection. The cost would depend on your age and personal circumstances but could cost thousands of dollars a year.
The ADF offers free education and training and/or study assistance schemes. If you’ve been receiving tertiary education at no cost or received any form of study assistance, consider what it might cost to continue your education outside Defence.
Take some time to think about these and any other benefits provided to you by Defence to get a better understanding of the real value of your employment package.
As an ADF member you will usually receive subsidised housing or rental assistance if you are not living in your own home. If you buy a home to live in you may be eligible for a range of other assistance schemes.
If you are receiving rental assistance you can calculate the value by multiplying the fortnightly assistance amount by 26 to get an approximate annual benefit.
If you’re in service housing you can estimate your benefit by deducting the rent contribution taken out of your pay, from the amount of rent you would pay each fortnight for a similar property in the same area. Multiply the result by 26 to estimate your annual benefit.
Housing assistance schemes for members buying a property include the Defence Home Ownership Assistance Scheme (DHOAS), Home purchase assistance scheme (HPAS) and Home purchase or sale expenses allowance (HPSEA)
Serving ADF members receive a range of healthcare benefits, including free medical and dental treatments, rehabilitation services, psychological support and access to fitness facilities like gyms, pools and sporting fields.
To put a value on these benefits, think about what you might be paying for if you were not an ADF member. For example, what would it cost you for private health insurance, prescriptions, physiotherapist, dentist, specialist visits, gym membership or other fitness related costs?
Medicare covers the costs of being admitted to hospital as a public patient, some of the fees charged by GPs and other medical professionals, and subsidised prescription costs for medicines listed on the Pharmaceutical Benefits Scheme (PBS). ADF members don’t pay the Medicare levy, currently 2% of taxable income.
Private health insurance covers some or all of the cost of a range of services not covered by Medicare, for example, a private hospital and the doctor of your choice, as well as ancillary services such as dental, optical and physiotherapy, not covered by Medicare.
Your pay consists of a base salary, with the addition of employment-related allowances. Your base salary can be found at the top of your payslip on the right, listed as ‘Annual salary’. If you need help reading your payslip, see the ADF guide on Pay and Allowances.
Note: From 13 May 2021, service, trainee, reserve and uniform allowances will be rolled into a single ‘Military salary’.
The earnings section of your payslip lists any allowances you receive. The amount in the ‘Current’ column is the amount you get every fortnight for each allowance. You can add allowances by typing in the name of the allowance in the ‘Add allowance’ box and clicking the + symbol.
A deployment provides some ADF members with additional allowances that are not part of regular pay. We have not included these allowances in the calculation of your remuneration package, however, you may want to take the additional deployment allowances into account if you are comparing your ADF remuneration with civilian employment.
Medium-term goals are those that you want to achieve in 3-6 years. This could include saving for a home deposit, paying off your car or paying down all your loan debts. Having a budget and your goals written down.
Long-term goals are plans you want to achieve in around 7 years or more. This could include buying a home or paying off your mortgage, paying for your children’s education or saving for retirement.
For long-term goals think about investing some of your money. Get some financial advice to work out a good investment strategy to reach your goals.
MSBS is a hybrid defined benefit and accumulation super scheme which closed to new members on 30 June 2016. If you are an MSBS member, your benefit will consist of a lifetime indexed pension (employer component) based on your final average salary and years of service. Some or all of this benefit can be taken as a lump sum when you have met a condition of release (the defined benefit). The scheme also has a member component made up of your compulsory and voluntary personal contributions, ancillary contributions and investment returns, that you will also receive as a lump sum when you have met a condition of release (the accumulation benefit).
The pension component can be taken from age 55. If you are retiring or resigning from the ADF after reaching age 55 or are entitled to a Class A or Class B invalidity pension, you will be eligible for a pension when you leave the Service. For all other members, your employer benefit will freeze and be preserved, increasing with CPI each year, until you are eligible to receive it.
The member component of your benefit may be left in MSBS, where it will increase with investment returns each year until you access it, or it can be rolled over to another complying super fund.
For more information contact the Commonwealth Superannuation Corporation (CSC).
If you joined the ADF for the first time after 30 June 2016, you will fall under the ADF superannuation arrangement, and will be a member of an accumulation fund, such as ADF Super. If you had previously served, and are a member of MSBS, you will be re-entered into MSBS on rejoining the Service.
For accumulation fund (eg. ADF Super) members, your benefit will be a lump sum based on contributions and investment returns. When you leave Defence, your money can be left in the fund, where it will continue to grow with investment returns until you meet a condition of release, or it can be rolled into another super fund.
If you’ve been in the Service for more than 12 consecutive months, you can keep your ADF Super account when you transition out and your new employer can contribute to ADF Super. In this case your insurance cover will change so contact the Commonwealth Superannuation Corporation (CSC) to find out what you need to know.
DFRDB is a defined benefit super scheme which closed to new members on 30 September 1991. If you are a DFRDB member, you will receive a lifetime indexed pension based on your final salary and years of service. Part of your benefit may be commuted into a lump sum, and you may receive an additional lump sum from your MSBS ancillary account, made up of voluntary personal contributions, amounts transferred in from other funds and other contributions, plus investment returns.
For more information contact the Commonwealth Superannuation Corporation (CSC).
Short-term goals are things you want to achieve within the next couple of years. These goals could be to pay off your credit card debt, buy a new TV, go on a holiday or buy a car. Whatever you have in mind, set yourself a realistic timeframe. The best way to save for short-term goals is to reduce your spending on non-essential items, like entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using your credit card.
Make your savings work for you by putting your money into an account where it will grow. Savings accounts are great because you can earn compound interest on your savings. If you’re on a low income, you may qualify for one of the savings programs offered by some charitable organisations.