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Tax Saving Tips for End of FY2024

Financial year 2024 will end on 31 March, so what we can do with tax planning to help us save tax in FY2024. Here are some tips:

Low value asset

The threshold for low value asset is still at cost less than $1000(GST exclusive).

You could claim an immediate tax deduction for assets costing less than $1000,

instead of book under fix asset and claiming depreciation over the following years.

Interest deduction limitation on residential property

Interested deduction limitation on residential property will change, as National promised to slowly reverse Labour’s changes in 2021.

The confirmed policy is now as below (pending pass into law)

FY2024 60% interest deductible

FY2025 80% interest deductible

FY2026 100% interest deductible

Repair and maintenance VS Capital improvement

When we do tax return on rental property, we often wondering if one expenses is capital expenditure or repair and maintenance. The fundamental principal is Repairs and maintenance restore a property to its previous state/value and include work to fix or prevent damage to or deterioration of the property. On the other hand Capital improvement add value to its original state.

For example: The HRV system in the property was broken and if property owner decide to replace the whole HRV system instead of repair it. Still this is a deductible expenditure, as the cost of replace it retore the value of the property to the previous state.

But, please bear in mind that you can only claim deductions up to the amount of rental income you earn in a year (ring fence rule).

Claim Home Office Expenses

If you work from home, no mater if it is a garage or a separated room to run your business, you may take expenses that related to business operation into your business. Expenses like, mortgage, insurance, rent or power can be put into business based on the area you used for your business.

Commercial building depreciation

Depends on depreciation method, commercial building is depreciable between 1.5% to 2%. However, the depreciation will be removed from 1st of April 2024.

Losses Carry Forward

To carry forward loss into next financial year, the company will need to meet shareholder continuity test, which at least 49% of your company's voting shares do not change hands during the year the loss was made, as well as the year it'll offset income.

Plus, from financial year 2021, you can still carry forward losses on the ground of no major changes in business activity, even if you do not meet the requirements of the shareholder continuity test.

Trust income tax @ 39%

Trust tax rate will increase from 33% to 39% from 1 April 2024, thereby aligning it with the top personal marginal tax rate. so, what we can do when we consider minimising exposure to the 39% rate:

  • No doubt, distribute income to beneficiaries on lower marginal tax rates will become more favourable.
  • Declare dividend prior to 31 march 2024 to extract retained earnings from companies owned by trusts, at a rate of 33%, avoid pay 39% in the future.
  • Consider more PIE investment

Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact us.