It is that time again to start thinking about tax.
The first thing you need to understand is that tax is part of the investment puzzle. You must ensure that you minimize (LEGALLY) the amount of tax you pay while at the same time not making an actual loss.
First let’s look at what not to do:
Stay away from tax deferral schemes, these schemes are designed to make someone else money right now and they only defer tax. Deferral of tax means you have to pay it next year.
Below are the types of products, which some “Financial Planners or Accountants” will start to push on you. Why? Because of the commissions, they earn.
- Negative gearing
- Investing in trees
- Prepaying interest
- Capital guarantee products
Prepayment of expenses, this only defers the tax to the following year as such only worthwhile if you think next year, you will make less money.
Making large capital purchases. It is too late, as these items will be depreciated proportionally to the year purchased.
Next let’s take a look of thing you can do to reduce your tax that make sense:
1. Salary Sacrifice to super – this is always top of my list and should be a core strategy of any long-term investment plan. It is by far the most effective way to reduce your personal tax. Note that your average tax rate should be above 30% for this to start being effective.
2. Capital Gains – time to go through your share portfolio and look to sell out some the dogs and book the losses. But first just check if you have any carried forward capital losses from last year.
3. Defer sales of any capital gain tax assets until the following tax year.
4. Review your investment structure. If you are on a high marginal tax rate, you should have investments in a trust or company. It might be too late for this year but makes sense not to make the same mistake next year.
5. Get your deductions paperwork in order, logbooks for motor vehicles, copies of receipts, etc.
For those getting ready to retire (ages 50 and above) you need to start looking at you superannuation and check the following:
1. What you have made this year in concessional contribution being employer contributions and salary sacrifice. Make sure below limits and top up if possible.
2. Look to make your non-concessional contributions. You can make up to $180,000 before June 30.
3. Start looking towards next year, for those over 50 years old you can increase your concessional contributions up to $35,000 and those under 50 you concession contributions can now move up to $30,000. Make sure you adjust your salary sacrifice.
Lastly, make sure you touch base with your financial adviser and double check if there are any last minute issues to attend.
If you need any help with the above please call our office on (07) 4771 4577.