Top tips (and mistakes to avoid) for EOFY

It’s now less than two weeks until the financial year ends. Deductions underpin many of the actions investors consider during this period. When asked what should be top-of-mind at the end of financial year, deductions feature heavily in the recommendations made by Paul Aliprandi, Strategic Financial Adviser at Wilsons Advisory.

Please note: The comments provided below are general in nature only, and do not take into account any personal financial circumstances. Always consult a financial adviser or tax professional for personal advice before making any financial decision.

Top 5 checklist of things people should do before 30 June

Among the biggest things to consider, “income and deductions” ranked among Aliprandi’s top tips: “To help save on tax, consider deferring income until the 2024/25 financial year and bringing forward deductible expenses before 30 June 2024.”

The other four key things he nominates for investors seeking to maximise their after-tax returns – without falling afoul of ATO rules.

Capital Gains: “Don’t sell investments for tax purposes! We strongly advise against selling and repurchasing assets to crystallise a capital or revenue loss – also known as a ‘wash sale’ – this is a form of tax avoidance that has serious consequences.”

Superannuation: “Make sure your super contributions are made before the 30 June 2024 cut-off. We encourage you to make contributions as soon as you can – moving funds or assets from a higher tax environment to one where it’s only 15% is a strategic mid to long-term winner!”

Rental Properties: Aliprandi notes that nine out of 10 rental property owners “get their returns wrong, so it’s important that interest and other deductions are claimed correctly – this will save you time and money, and a lot of heartache!”

Crypto and NFTs: “Cryptocurrency is also on the hitlist and the ATO is interacting with cryptocurrency exchanges and other providers to trace transactions. Declare your cryptocurrency income and keep records of your crypto transactions.”

What are 3 of the most common mistakes around EOFY (and how can you avoid them?)

While it may seem straightforward that expenses incurred for investment property are tax deductible, it’s not so simple, explains Aliprandi.

When claiming deductions for work conducted on an investment property that is capital in nature, “the general rule is that if there has been an improvement, then the expense should be capitalised and written off over its ATO approved effective life rather than deducted.”

He also emphasises the risk of failing to correctly apportion expenses for an investment property where there is personal usage, such as a holiday home.

Discretionary trusts

Keeping complete records, and accurately reporting these, is another common element of Aliprandi’s recommendations. In the context of discretionary trusts, he says it is crucial to ensure you submit complete information.

Taking a step back, what is a discretionary trust? “It is a legal relationship where one party (the trustee) holds something (usually money, land and/or shares) for the benefit of another (the beneficiary or beneficiaries),” according to the Australian Shareholders’ Association.

The term “discretionary trust” is often interchanged with “family trust,” - this is a trust where the trustee has discretion.

“To maximise the benefit of a discretionary trust, you should obtain the trust’s draft tax reports from your adviser and prepare accurate estimates of the taxable income for each of your potential beneficiaries. Not using a corporate beneficiary is also a common mistake,” Aliprandi says.

He also emphasises the need to remember to include any foreign currency accounts you might hold.

“Forgetting to include gains and losses made on holding foreign currency – you should seek advice from a tax specialist if you hold a foreign currency account.”

What is your number #1 tip for EOFY?

“Ensure you can substantiate your deductions, if you don’t have receipts, haven’t appropriately apportioned your phone bill or kept a diary, your claims may be denied if the ATO decides to review,” Aliprandi says.