As we approach the end of the financial year, there are a number of smart strategies you could consider to help you streamline your finances and minimize your personal tax liability.
1. Pre-pay income protection premiums and reduce this year’s tax
By pre-paying 12 months’ income protection insurance premiums you bring forward your tax deductions. This will help reduce your taxable income, and should result in you paying less tax for what is considered essential for individuals who rely on employment income to meet their, or their family’s, lifestyle needs.
2. Get a super top up from the Government
If you earn less than $46,920 per annum you may be eligible for a super co-contribution from the Government of up to $500. For each, after tax dollar in personal super contributions, the Government will contribute from 50 cents up to the $500 maximum. For purposes of this test, total income is assessable income, plus reportable fringe benefits, plus reportable employer superannuation contributions, less allowable business deductions.
3. Pre-pay investment loan interest and reduce this year’s tax
For those who have tax-deductible debt such as loans used to acquire investments, you can look at pre-paying 12 months’ interest on your investment loan… Prepaying interest means it will be fully deductible in your 2012/13 tax return.
Reducing your taxable income should result in you paying less tax. Your tax adviser can help you determine what can be claimed.
4. Review contributions
It’s a good idea to check the level of super contributions made this financial year, especially if you are salary-sacrificing. This has caught out people in recent years, so it’s worthwhile spending a small amount of time reviewing super before the end of the year, and stopping any additional contributions over the cap limit.
The concessional contribution limit is $25,000 for this financial year and contributions over this sum are subject to being taxed at the top marginal tax rate.
5. Additional contributions
Making non-concessional contributions of up to $150,000 each, or $450,000 (using the “bring-forward” provision), can significantly increase super balances.
This strategy is particularly helpful for those that could have contributed more than they did but have left it too late.
Non-concessional superannuation is still one of the most tax-effective ways to invest, even considering any proposed changes, so it’s worthwhile topping up super whenever possible.
6. And for trustees of SMSF –
First thing to note is that June 30th falls on a Sunday this year, so make Thursday the 27th your deadline. Funds transferred from Friday the 28th are unlikely to hit an account before July 1.
Our financial planner at Solid Financial Advisors can sit down with you and look at the different strategies to see which suits you the best. Please contact Nick Status on (03) 9690 2666.