No-one likes to pay too much tax. Towards the end of each financial year there are steps we can take to help minimise our current year tax liability. There are some simple things we can consider doing that can collectively make a significant impact on your tax bill. The following tips can apply to those who are employed or self-employed.
- Pre-pay deductible interest. Usually you can get reduced fixed rates by pre-paying 12 months of interest on investment property loans or gearing/margin plans.
- Pre-pay insurances. If paying by monthly instalments and cash flow permits, you can pay upfront and obtain a full deduction.
- Pre-pay lease or rental payments. Much the same as pre-paying insurances.
- Write-off depreciable items no longer of value. Review your depreciation schedule to determine if anything can be written-off. Any remaining written down value can be claimed as a deduction.
- Maximise super contributions via salary sacrifice. Depending on your age you can claim up to $35,000 this financial year as a deductible super contribution. Salary sacrifice of super can be applied to ongoing salary and bonuses subject to making the appropriate elections before you earn the income.
- Move assets into super. By moving personal assets into super you are shifting assets into a tax concessional environment. If old enough, consider commencing an account based tax free pension. All earnings on pension assets are tax free.
- Consider housekeeping your investment portfolio. Consider selling shareholdings with capital losses and offset against present/future capital gains.
- Don’t forget the sometimes forgettable rebates and other payments you can pick up such as spouse super contribution rebate ($540), low income tax offset and super co-contribution of up to $500 (among others).
- Fringe Benefit Tax (FBT) strategies. Not so much a year-end strategy but certainly a very often overlooked area. If you are required to relocate to take up a new role (even with the same company) many relocation costs can be reimbursed by the employer. This can be received on a salary sacrifice basis and will be effectively received as tax free salary. Types of expenses that qualify include removalist costs, costs of selling your existing home, cost to store household contents, etc. Another often overlooked concessional fringe benefit is the Remote Area Housing exemption. Under the definition of “remote” many regional towns and centres are actually considered remote. This benefit will allow you to essentially claim 50% of your home loan interest as a tax deduction. A residential fuel concession is also available under the remote area FBT provisions.
- Small business asset write-off. An immediate deduction for assets under $1000 is available.
- Deductible super contribution. For those who operate via a company structure, don’t forget that you can salary sacrifice this in addition to salary paid during the year. This is more tax effective than receiving this as salary. Deductible super contributions are taxed at 15% whereas salary payments can be taxed at up to 46.5% or at 30% if profits are left in the company.
- Defer income or bring forward expenses to reduce current year profit. Eg farmers can stockpile fuel, fertiliser, fodder, consumables/parts, etc.
- If operating on an accruals basis for your tax you can consider reviewing your debtors list for bad debt write-offs.
This is not an exhaustive list but provides a good starting point. With tax matters, you should always consult your tax adviser to make sure that these strategies can be applied to your own situation.