It’s Time To Start Thinking About Tax
A bit of a dreaded topic, I know, and most people cringe at the sound of it. Tax can be complex and complicated.
Most people put their annual tax return in the “too hard basket” and only begin to start thinking about it when they receive late reminder notices from the ATO to lodge their return.
We are wrapping up another yet another financial year, and I’ll admit I actually like this time of year… it means I am closer to getting my refund from the tax man.
This is the first year Wealth Enhancers are offering a personal tax return service to both existing and new clients, so I feel it only fitting to provide you with some strategies you may be able to put in place to ensure you do not pay a single dollar more tax than you need to.
Of course it is important to recognise the best tactics are adopted in July, not June. As early as possible in any financial year.
Proper tax planning is more than just finding bigger and better deductions — the best tips are those that set your tax affairs in order for future income years.
Not all of the following tips will suit your circumstances, but as a list of possibilities they may get you thinking along the right track.
You can claim up to $300 of work-related expenses without receipts, provided the costs are related to earning your income. This is always an added bonus to include this deduction in your return. Better than nothing, right?
Vary PAYG instalments
Do you receive a large refund at the end of each year? Do you have a negatively geared investment property or negatively geared investments? If so, why not consider completing a PAYG Withholding Variation form and request your employer reduce your PAYG withholding tax from each pay period.
This means rather than waiting until the end of the year to receive your tax refund, you get to take home more pay each pay cycle.
Prepaying expenses can be an effective way of reducing taxable income.
In May and June, try to bring forward any allowable deductions you can. If you know that next year you will be earning less (maternity leave, going part-time, starting a business, etc.), deductible expenses that can be paid in the current financial year may provide more financial benefit in the year where you’ve earned a higher income.
Bringing forward investment property expenses
Many expenses stemming from owning a rental property are deductible, so it can be helpful to bring forward any expenses before June 30 and claim them in the present financial year.
If you have an investment property that needs some repairs for example, have these (deductible) payments fall into the current financial year.
Selling investments and CGT
Any capital gains you incur (from an investment like shares or property) are added to your assessable income. This in turn means you are required to pay more tax.
If you have investments which have made a loss, it may be worth considering selling these. This means the gains you made on your successful investments can be offset against the losses from the less successful ones, reducing your overall taxable income. Of course, don’t let mere tax drive your investment decisions. Check with your adviser to determine whether this strategy will suit your circumstances.
If you’re looking for more detailed info, check out our Tax Planning Strategies document, along with our 2013-14 Tax Fact Sheet.
I hope that these strategies will give you some food for thought for next year, for now… All the best getting organised. Let us know if you need a hand and have a happy new financial year!