Now that the end of the financial year is just around the corner, it's time to put some real focus into your tax minimisation strategies. It's also a time to start thinking ahead to the new financial year and to get your thoughts clear on what you'd like that to look like.
Listed below are some ideas for you to implement, but just make sure you've got them covered before June 30:
Pay & Delay if You Can
Now is a perfect opportunity to pre-pay some expenses that you'll likely carry through with you into the next financial year. For example, see if you can pay for subscriptions, the cost of your income protection policy, conferences and membership fees all before June 30. Also, ask your lender if you're able to pre-pay any of your interest for the next financial year. Then if the opportunity arises, see if you can put off receiving income before the June 30 deadline. This might be achieved by holding off on issuing invoices or even reviewing your term deposit maturity dates.
Mortgage Offset Account
This is more often viewed as a strategy to cut interest costs and the length of the loan on a mortgage. The other side of the equation is a tax saving on money that would otherwise have been parked in a savings account and earning interest, on which you would be taxed at your marginal tax rate. Say you've accumulated some cash or sold some assets and you're not sure what to do with the proceeds. If you've got a home loan, putting this extra cash into an offset account can not only reduce the amount of interest payable on the loan but it will also stop you paying tax on the interest you would otherwise have earned.
Discretionary Family Trus
An effective way to hold investments, a trust is a separate investment structure where assets are controlled by one or more persons (the trustee/s) on behalf of a group of other persons (the beneficiaries). A discretionary trust allows the trustee to decide who gets the income and capital the trust owns. These can suit someone on higher tax brackets with family members listed as beneficiaries who are on lower rates. For example, rental income from an investment property owned by the trust could go to members of the trust on lower incomes. The trust does not pay tax, but the beneficiary does, with income and capital gains derived by a trust generally assessed at the tax rates of the beneficiary.
Reduce Capital Gains
If you're sitting on capital losses on some of your smaller share investments and you don't have a long term plan to continue holding these, it may be a good time to sell these shares and use the losses to offset against any gains you've made earlier in the year.
Top Up Your Super & Salary Sacrifice
Topping up your super can be one of the best deductions around, as you're still the holder of the money, minus the 15% contribution tax. This is different from claiming a deduction on paying bank interest as once that expense is paid, the bank has the money rather than you. Concessional contributions are allowed for up to $25,000 per person under 75, so make use of these limits. For a couple, that's up to $50,000 between them that can be set aside to accumulate in a lower tax environment. Don't forget that if your employer is making contributions for you, you're only able to salary sacrifice by the difference to take you up to the $25,000 limit.
Small Business Immediate Asset Write Off of Up to $30,000
If you're a small business, this is definitely something you want to make use if you need new capital items. If you buy an asset and it costs less than $30,000, you can immediately deduct the business portion in your tax return.
You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $30,000 if:
you have a turnover less than $50 million (increased from $10 million), and
the asset was first used or installed ready for use in the income year you are claiming it in.
If you're thinking of making a charitable donation it's best to do so before June 30 as you'll most likely be able to claim the full donation amount.
The New Financial Year Done Right
If you've got your house in order in the lead up to June 30, now is a perfect time to cast your mind ahead to the beginning of July. Many people make the mistake of not using this time wisely to plan the year ahead, and to get clear on what you'd like your finances to look like. Here are some of our tips to get you started:
1. Time for a budget
Regardless of whether you're in business yourself or working for wages, use the start of the financial year as a time to refresh that household or business budget. This means mapping out all of the income you're likely to receive over the year, next to all of the expenses you're likely to incur. If there's a surplus, this is your most important number, because it's what you do with this surplus that will play a big part in determining your year ahead. You may decide it's time to accelerate your debt reduction, or make an investment with what's left over.
2. Superannuation contributions done early
If you make top-up contributions to super during the year, there's no reason why you can't accelerate that in July, which really just gives your superannuation that little bit extra time with a larger amount invested.
3. Get your kids investing
If saving and investing is good enough for you, it's also good enough for your kids. This might be in the form of encouragement towards that house deposit, or a small investment portfolio for them to use in the years ahead. Getting your kids involved with some education around their finances is a great gift you'll be giving them.
This is by no means an exhaustive list, and if you need any help with any of these points, please don't hesitate to contact us on 5482 2855.