2024–25 Personal Tax Planning: Strategies to maximise tax outcomes before 30 June 2025

As the end of the 2024–25 financial year approaches, individuals have a crucial opportunity to review their income position, superannuation contributions, investments, and deductions to manage their tax affairs efficiently. With significant changes to personal income tax rates taking effect from 1 July 2024, there is scope for tax optimisation, but action must be taken before 30 June.

By reviewing income sources, superannuation contributions, investment activity, and eligible claims before 30 June, individuals can proactively manage their tax obligations.

This article outlines the key personal tax planning strategies to consider before year-end to achieve the most favourable tax outcome.

Take advantage of lower tax rates from 1 July 2024

From 1 July 2024, Australia’s personal income tax brackets changed significantly, reducing the tax burden on taxpayers of all income levels:

• The 19% rate will drop to 16%.
• The 32.5% rate will reduce to 30%.
• The 37% threshold will increase from $120,000 to $135,000.
• The 45% threshold will increase from $180,000 to $190,000.

For non-residents, the 32.5% rate will similarly reduce to 30%, with thresholds for higher rates also adjusted upwards.

Planning tip: The new personal income tax structure will significantly reduce the tax burden on individuals, with the income tax rates for low- to middle-income bracket ($18,201 - $45,000) set to be further reduced in the 2026–27 and 2027–28 financial years.

Maximise superannuation contributions before 30 June

Superannuation remains one of the most tax-effective investment structures in Australia.

Key contribution opportunities include:

• Concessional (pre-tax) contributions: The annual cap is $30,000 for FY2025. If your total super balance was below $500,000 at 30 June 2024, you may also be eligible to use previously unused concessional caps over five years.
• Non-concessional (after-tax) contributions: The annual cap is $120,000, or up to $360,000 under the bring-forward rule, depending on your age and total super balance.

Important: Contributions must be received by the fund before 30 June and accompanied by a valid ‘Notice of Intent’ to claim deductions (if applicable). Excess contributions may be taxed at your marginal rate or at 47% depending on the type of super contributions. Please contact your tax advisor or financial planner prior to making any voluntary contributions to avoid adverse tax consequences for excess contributions.

Manage capital gains and losses

If you have disposed of shares, managed funds, property, or other investments this year, the resulting capital gains may be reduced through:

• Applying the 50% CGT discount (if held for more than 12 months);
• Offsetting with realised capital losses;
• Deferring further gains until after 30 June (if tax rates or income will be lower next year).

Tip: If you sell investment assets during this financial year and realise a gain, it is advisable to make use of the 50% capital gains tax (CGT) discount available for assets held for more than 12 months. You may also consider selling loss-making assets to offset the gain. However, it is essential to ensure that all transactions are commercially justifiable and that comprehensive records are retained to mitigate the risk of ATO scrutiny.

Consider prepaying investment loan interest

If you have borrowed to fund investments (e.g., property or shares), you may be eligible to prepay up to 12 months’ worth of interest and claim the full deduction in FY2025.

Conditions include:

• The loan must be for income-producing purposes only;
• Prepayment must be made before 30 June;
• The loan agreement should permit and document prepayment terms.

Tip: If you have a loan used for investment properties or stocks and plan to prepay interest, it is recommended to complete a compliant prepayment arrangement by 30 June, provided the loan is solely for investment purposes and not for personal use. This will allow you to legally claim a tax deduction in the current financial year.

Review income protection insurance arrangements

Premiums for income protection policies held in your own name (outside super) are generally fully deductible. However, if paid from a super fund, you cannot claim a deduction personally.

Claiming home office deductions

If you worked from home this year, you can choose one of two methods to claim tax deductions for home office expenses:

• Fixed rate method: 70 cents/hour, inclusive of energy, phone, internet, and consumables. Requires a record of the number of actual hours you work from home during the entire income year (e.g., a timesheet, roster, diary or other similar document) and at least one bill for each category.
• Actual cost method: Requires detailed records for each eligible expense and an apportionment calculation.

Tip: Choose the method that provides the best outcome based on your circumstances and recordkeeping.

Work-related car expenses

For personally owned cars used for work purposes, you may use:

• Cents per kilometre method: 88 cents/km, up to 5,000 km per car per year. No logbook required, but reasonable evidence of travel patterns is expected.
• Logbook method: Requires 12 weeks of valid logbook records (updated every 5 years) and receipts for all expenses.

Note: In most cases, home-to-work commuting is not considered as work-related and not deductible.

Make tax-deductible charitable donations

Donations to registered Deductible Gift Recipients (DGRs) are tax deductible if:

• Payment is made by 30 June and a receipt is retained;
• No material benefit (e.g., raffle tickets, goods, or services) or advantage is received in return.

Avoid Medicare Levy Surcharge with private health insurance

If your taxable income exceeds the surcharge thresholds and you do not hold appropriate private health insurance, you may incur a surcharge of 1–1.5%:

• $97,000 for singles;
• $194,000 for couples/families (plus $1,500 per dependent child).

Consider obtaining appropriate hospital cover before 30 June if applicable.

Government co-contribution for low-income earners

If your total income is under $45,400 and you earn at least 10% from employment or business, voluntary after-tax super contributions of up to $1,000 may attract a government co-contribution of up to $500.

This is a tax-free boost to your super fund and does not need to be reported on your tax return.

Division 293 tax for high-income earners

If your combined income and concessional contributions for Division 293 purposes exceed $250,000, an additional 15% tax may apply to your contributions.

Tip: Review your expected income, and if your total income is likely to exceed the threshold, consider adjusting the timing of voluntary super contributions and/or exploring other strategies to manage your taxable income.

ATO data matching – ensure full disclosure

The ATO has expanded its data-matching activities during the 2024–25 financial year to strengthen compliance and identify potential underreporting. These programs involve collecting:

• Medicare exemption data from Services Australia to confirm the correct application of Medicare levy and surcharge exemptions;
• Property ownership and transaction data from property management platforms to verify rental income reporting and assess capital gains obligations;
• Sales and transaction records from online marketplaces to ensure income from digital sales is correctly declared; and
• Insurance information on high-value lifestyle assets (such as boats, luxury vehicles, and artwork) to assess overall wealth and financial position.

Important: Taxpayers involved in any of the above activities should ensure that relevant income is fully disclosed and supported by appropriate documentation to meet ATO requirements.

Conclusion

The 2024–25 year presents taxpayers with significant opportunities for tax savings and strategic planning, particularly given upcoming rate changes and ATO enforcement trends. Acting before 30 June is critical to capturing these benefits.

For a tailored approach to your personal circumstances, contact the team at PKF for professional advice and assistance in implementing your end-of-year tax planning.