Central Coast Mortgage Brokers

Tax Tips for Year-End

Tax planning shouldn’t be left until last few weeks and days of the financial year.  Forward planning is the best way to ensure an optimal outcome.

With the end of another financial year only a few not the way, it is timely to review tax strategies that may help make a difference in the year ahead to individuals and families.

Income Splitting Where Possible

Couples should consider making investments in the name of a spouse with a lowering come to minimise the tax payable on income contributions and capital gains.

It’s important to be aware, however, that this strategy may not be the best approach the negatively Tax planning strategiesgeared investments.

Children aged 18 or over are entitled to adult tax thresholds, which can be very handy during the years when they are in full-time study.

So consider investing in their name, the especially for relatively short-term investments.

Even better, investments can be held in a family trust, and uni students make great family trust beneficiaries, often allowing the trust to distribute income from its investments in a way that provides significant tax savings.

Investments in a discretionary family trust offer maximum flexibility.

Again, however, it is important to review this strategy the negatively geared investments, as gearing generates tax losses that can be trapped in a trust.

While there has been ongoing uncertainty in relation to trusts, they nevertheless remain useful beer cool the building up family wealth, and for succession planning.

Income splitting is generally much easier for small business owners and executives.

However be aware the effect of the personal services income (PSI)) rules where a service based business has, or is expected to have, one main client during the year and does not have other employees servicing clients.

Maximise Deductible Super Contributions

It is important to be aware of the deductible contribution limit, which is still $25,000 per those aged 59 and under, but has increased to $35,000 those aged 60 and over.

For a couple this amounts to a combined limit of at least $50,000 and perhaps $70,000, so don’t forget to contribute for your spouse, if they have enough taxable income to make use of the deduction.

Those of you or our employees will need to have superannuation contributions salary sacrificed, so you may need to speak to your employer, and you should allow plenty of time for the arrangements to be made before 30 June.

Of those who are not employees, it is important to be sure you obtain the correct documentation from your superannuation fund to substantiate claiming deduction before lodging your tax return.

The ATO is very strict on this point and failure to have the right paperwork can result in loss of the tax deduction.

Review Deductible Versus Non-Deductible Debt

The aim is generally to pay down non-deductible debt where possible.

Lodge your tax return early if a refund is expectedIt is common to take out an interest only for loan investment purposes, and then make all principal repayments against the home loan and any other non-deductible debt.

This is a sensible strategy, and perfectly acceptable to the ATO when set up properly.

It may also be worth looking for ways to restructure debts, but beware of debt restructuring that appears tax driven as the ATO could apply anti-avoidance legislation.

Also remember that tax deductibility depends on the use to which the money was put, rather than the security provided to the borrowing.

For example, you may take out an investment loan to buy shares, using the spear borrowing capacity on your home mortgage to secure the loan against your family home and keep the interest rate down.

The interest on the investment loan in that case is still tax deductible.

By contrast, you need to be very careful about using redraw facilities or using the security of unencumbered investment assets if the funds can be seen to be used for private purposes.

The ATO will follow the money, and they will be concerned with where it goes rather than the assets used for security.

Prepay Deductible Expenses at 30 June

Individuals who are not in business can claim up to 12 months of prepaid expenses, for example, interest on investment loans and management fees.

Also, more generally, aim to make any tax-deductible payments (such as donations, subscriptions and income protection insurance premiums) before 30 June to ensure they may get into this year’s tax return.

Regardless of your tax position and what you are planning to claim any doubt, don’t forget to lodge your 2014 tax return early if you are expecting a refund.

Not only do you get the refund sooner, but this may help reduce your ongoing quarterly tax instalment payments.

Contact Us

AIMS Accounting Service
22 Swindon Close
Lake Haven NSW 2263
Phone: 02 4392 8720

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