Tax time often feels like a rush, a scramble for receipts, and a hope for the best. But for the 2024-2025 financial year, staying informed is the first step to optimising your return and ensuring you don’t leave money on the table. With some significant changes taking effect, understanding what’s new and what deductions you can claim is more important than ever.
Understanding the New Tax Rates: The Stage 3 Tax Cuts Are Here!
The biggest change for individual taxpayers in the 2024-2025 financial year are the legislated Stage 3 tax cuts, effective from 1 July 2024. These changes mean more money in your pocket, as they impact multiple income brackets:
- 19% tax rate reduced to 16% for incomes between $18,201 and $45,000.
- 32.5% tax rate reduced to 30% for incomes between $45,001 and $135,000.
- The threshold for the 37% tax rate increases from $120,000 to $135,000.
- The threshold for the top 45% tax rate increases from $180,000 to $190,000.
These adjustments are designed to provide cost-of-living relief across all income levels, with the most significant percentage benefits seen in middle-income brackets. It’s crucial to understand how these new rates apply to your specific income to properly estimate your tax position.
Key Deductions for Employees: Don’t Miss Out!
Even with tax cuts, maximising your eligible deductions remains paramount. The ATO continues to focus on accurate record-keeping, so ensure you have evidence for all claims.
- Work-Related Expenses:
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- Working From Home (WFH) Expenses: For the 2024-2025 year, the fixed rate method for claiming additional running expenses has increased from 67 cents to 70 cents per hour. Remember, you still need to keep a record of the hours you work from home and evidence of bills (e.g., electricity, internet) that contributed to these costs. Alternatively, you can claim actual costs, but this requires even more detailed record-keeping.
- Car Expenses: If you use your personal car for work (excluding normal commuting), you can claim deductions. The cents per kilometre method is 88 cents per kilometre for 2024-2025 (up to 5,000 business km). For higher usage, the logbook method offers a more precise claim.
- Self-Education Expenses: Costs directly related to improving your skills or knowledge for your current job are deductible. This could include course fees, textbooks, and travel.
- Uniforms & Protective Clothing: If you’re required to wear a specific uniform or protective clothing for work, you can claim the cost of purchasing and cleaning it.
- Tools, Equipment & Other Assets: Items purchased for work costing under $300 can often be claimed in full in the year of purchase. More expensive items are depreciated over their effective life.
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2. Other Common Deductions:
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- Cost of Managing Tax Affairs: Fees paid to a registered tax agent (like Everest Tax!) for preparing and lodging your tax return are fully deductible in the following year.
- Donations: Donations of $2 or more to registered charities with DGR (Deductible Gift Recipient) status are deductible.
- Income Protection Insurance: Premiums paid for income protection insurance are generally deductible (if paid outside of superannuation).
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ATO’s Focus: Records, Records, Records!
The ATO continues to use data matching to identify incorrect claims. This means having proper records – receipts, invoices, logbooks, and activity statements – is more critical than ever. Inflated claims or claims without proper substantiation are red flags that can lead to an ATO review or audit.
Don’t Leave Money on the Table!
While tax cuts are welcome, understanding all your entitlements ensures you maximise your financial position. Navigating the nuances of deductions, particularly with the new tax rates, can be complex. That’s where professional advice becomes invaluable.
