With 30 June fast approaching check out the Top Ten Tax Tips below to see if you could benefit from one of these end of financial year strategies.
1. Government co-contribution – make a contribution to your superannuation and if your income is less than $30,342 and you are aged less than 71, the Government will put in $1.50 for every dollar that you contribute. This represents a return of 150% on your investment. Even if your income is higher (up to a maximum of $60,342) you can still be eligible for a part co-contribution. Click here for a short video I have produced explaining the Government Co-contribution. There is also a calculator to determine how much you should contribute to superannuation to achieve optimum benefit from the scheme.
2. Spouse contribution - If your spouse earns less than $10,800 you could receive a rebate of $540 by contributing up to $3,000 into your spouses superannuation fund. A rebate means you get to keep $540 that you would have otherwise paid in tax.
3. Deductible contribution - if you are eligible, offset your assessable income with a deductible contribution to your superannuation fund.
4. Work related expenses - pay for any work related expenses that may be falling due prior to 30 June to claim the tax deduction in this years' tax return. Work related expenses may include items such as subscriptions to associations, seminars, conferences, education workshops, books, journals, computers, software and protective clothing.
5. Education tax refund - If you're eligible for the Education Tax Refund you could get 50% back on a range of primary and secondary school education expenses, such as computers, educational software, textbooks and stationery.
6. Income Protection Insurance Premium - You can pay your Income Protection Insurance Policy Premium before June 30th to benefit from the tax deduction this financial year rather than waiting more than 12 months to receive the benefit. A tax deduction reduces your taxable income by the amount of the deduction. It is not as beneficial as a rebate.
7. Donate - to tax deductible organisations prior to the 30 June and reduce the tax you pay this financial year. This not only lowers the tax you pay by reducing your taxable income but also benefits the organisation you give to.
8. Offset capital gains with losses or vice versa - if you have capital gains or capital losses consider any assets sales that you could complete prior to 30 June to offset the losses or gains depending on which is more beneficial to you.
9. Self employed – receive a 50% bonus deduction on the cost of acquiring eligible assets. The asset must be purchased before 31 December 2009 and used before 31 December 2010 to be eligible for the deduction. If you purchase the asset before 30 June 2009, you can claim the deduction in your 2008/09 tax return.
10. First Home Savers Account (FHSA) – save for your first home in an effective way through a combination of Government contributions and low taxes. You could put $10,000 into a FHSA each year and the Government will boost your savings with an additional 17% co-contribution up to a maximum of $850 per annum.
Whether it is year end tax planning, giving decisions, estate planning or any other financial decision it is important that the tail doesn't wag the dog i.e. you first need to decide what your goals are and then use the best techniques to achieve them rather than making ad hoc decisions based on techniques for reducing income tax.
Gavin Martin is a Financial Adviser, Managing Director of Cornerstone Wealth and founder of www.mastermymoney.com.au
Disclaimer
This article does not take into account the personal objectives, financial situation or needs of any person. You should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and obtain professional financial advice prior to making any decision.