April and May are traditional tax planning time.
We have put together some last minute ideas for you to consider so you can better manage the tax outcome.
As a firm we promote strategies that involve finding the right mix between long term investment and minimisation of the taxman’s share of the income. Best advice is always know the limits and do not invest or transact solely to save tax. More often than not, investments that are undertaken solely for tax purposes have ended in tears. (i.e. Timbercorp, Equity linked bond or New Zealand Super scheme).
Contrary to popular belief, there are some good tax effective strategies and concessions that are available depending on your particular circumstances. We have listed some ideas for you to consider:-
Tax tip No 1: Education allowance
If you have children who are at school, you can claim a rebate from the taxman.
For every child in primary school, the refund is $750 rebate on your tax. For Secondary school child you can claim a rebate of $1,500.
The refund is available on the following items:
- Laptops;
- Internet connection;
- Educational software; and
- Textbooks
School fees are not included.
Tax tip No 2: Keep contributing into superannuation
For those under the age of 50, you can make a contribution of up to $25,000. Those over the age of 50 can put in $50,000. All business owners should consider contributing to the maximum (if cash flow permits). However, be careful not to go over these amounts as there are penalty tax on anything more contributed.
Tax tip No 3: Use a tax agent
Every taxpayer is required to lodge their tax returns by October of that year. The Australian Taxation Office provides tax agents with extensions to lodge your tax returns beyond October. If you have to pay tax, this can be a good way to delay the payment of tax.
But remember, it is no use delaying your tax return if you are getting a refund, information should be provided to your tax agent as close to 1st July of the next financial year.
Tax tip No 4: Prepay interest
For individuals, prepayment of interest on investment property or share loans should be made. Remember you can only claim 12 months ahead.
Tax tip no 5: Crystallise any capital losses
If you have made and crystallised capital gains this financial year, you should consider selling any investments that have lost money before the 30 June. That way you can offset any gains from losses and minimise your overall taxable income.
Remember, only consider selling these shares if you do not intend to purchase them straight away. The tax office is now watching these transactions and has issued a ruling on wash through provisions.
If you would like to discuss or implement these strategies, please give us a call and we can guide you through the processes.
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