Preparing for tax time

June 13, 2014
Jason Sibio

June 30 is just around the corner so now’s the time to get cracking with money-saving tax strategies.

Strategies if you are an employee
Making salary sacrificed super contributions offers a simple way to save on tax and build wealth. It involves having part of your before-tax salary paid into your super rather than taking the money as cash in hand.

These contributions are taxed at 15%, which is likely to be below your marginal tax rate (which could be as high as 46.5%), so more of your money goes towards growing your super rather than paying the tax man.

Up to $25,000 annually can be added to super through pre-tax contributions ($35,000 if aged 60-plus). This limit includes your employer’s compulsory contributions.

Ask the boss about using salary sacrifice to grow your super, or consider increasing existing contributions, before 30 June. It's also a great idea to think about sacrificing some, or all, of your annual bonus!

A free helping hand
If you earn $33,516 or less this financial year, the government will make a tax-free contribution worth up to $500 when you make an after-tax super contribution of up to $1,000. The co-contribution cuts out altogether if you earn up to $48,516 annually.

Add to your spouse’s fund
If you are partnered, the spouse super tax offset is worth a look. It provides a tax saving equal to 18% of after-tax contributions up to $3,000 annually made on behalf of a non-working or low income spouse.

The offset, which is worth a maximum tax saving of $540, cuts out altogether if your spouse earns $13,800 this financial year. It’s available to same sex and de facto couples.

Strategies if you’re self employed
Self-employed workers can claim a tax break for super contributions worth up to $25,000 annually if you’re aged under 59, or $35,000 annually if you’re aged 59-plus.

More than just a tax-friendly way to build retirement savings, making pre-tax super contributions can reduce the capital gains tax applicable to the sale of any assets during the year.

Time key transactions
Paying tax deductible expenses like income protection insurance premiums before 30 June can boost deductions. Property investors can also claim up to 13 months worth of prepaid interest on a rental property loan.

On the flipside, delaying income from investments or business receipts until after 30 June can provide tax savings.

As capital losses can only be offset against capital gains for tax purposes it can help to sell any underperforming assets before 30 June to minimise capital gains tax.

Planning for the financial year ahead
Part of good tax management involves making plans for the year ahead rather than facing a last minute rush.

Your financial adviser can help you introduce a range of tax saving strategies including:

  • Formalising salary sacrifice super arrangements from 1 July to take advantage of the increased annual limits that will be available to many workers.
  • Setting up regular monthly payments into super if it’s likely you could be eligible for the government co-contribution.
  • Paying income protection premiums directly rather than through your super.
  • Ensuring investments are held in the name of the person with the lowest marginal tax rate.

If you have any questions, please give me a call on 03 9432 6070, and I'll be happy to talk you through what this means for you.

Jason Sibio - BBus ADFP - Financial Adviser
Mortgage Choice Fianancial Planning
Authorised Rep No 449850

Note: This document contains general information only. You should obtain professional advice taking into account your personal circumstances before making any financial or investment decisions

Posted in: Financial planning

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