30 ways to maximise your tax return
The end of the financial year is rapidly approaching and now is certainly a great time to take steps to reduce your tax bill and put yourself in the best position for the next financial year. All too often tax planning is left to the last minute which makes it difficult to minimise tax, so consider the below tips for your personal tax, business or superannuation fund.
Your personal tax return
- Prepay your expenses: By prepaying 12 months of tax-deductible expenses, you can bring the deduction forward into the 2012/2013 financial year. A good example of this is income protection insurance but other options are prepaying interest on margin loans or investment loans.
- Delay income: If you are able to, try to defer income until after June 30 to avoid paying tax this financial year. As an example this may be done by reviewing term deposit maturity dates or legitimately deferring income by holding off issuing invoices until July 1.
- Charity: If you are thinking of donating money, you may be able to receive a tax deduction for gifts and receive that deduction this financial year.
- Repairs and Maintenance: If you hold an investment property, consider doing minor repairs and maintenance prior to 30 June.
- Buy health insurance if you are a high-income earner: To avoid the Medicare Levy Surcharge, high-income earners should take out private health cover. To avoid the surcharge for the entire year, the insurance needs to be held for the entire year otherwise it will be prorated.
For your business
- Pay super early: Superannuation guarantee payments for your staff aren’t due until July but paying these in June will give you a deduction for them in this financial year as opposed to next financial year.
- Trusts and companies: Trusts and companies can distribute funds to recipients on lower tax brackets to minimise tax payments. Ask your financial adviser to review your options.
- Structure: Whether you operate as a sole trader, partnership, in a trust or company, it’s always a good idea to review your current business structure and whether this is still appropriate for your current situation.
- Immediate write offs: For eligible businesses, assets costing less than $6,500 can be written off immediately and applies to the purchase of assets used in a business. Check with your accountant as to whether you are eligible.
- Bad Debts: If you are not going to get paid, then it is best to write these off as a bad debt prior to June 30 in order to claim the tax deduction.
- Trading stock: A stock take is the best way to write off any lost, damaged or obsolete stock and can reduce your taxable income.
- Stationery: Stocking up on stationery and other consumables before June 30 can help offset profits.
Your superannuation contributions
- Get free money: If you will earn less than $46,920 this financial year, and make a non-concessional (after tax) contribution into your superannuation, the government will contribute up to 50 cents in the dollar (percentage varies with your income) to a cap of $500.
- Spouse contributions: If your spouse earned less than $13,800 this financial year, you can claim a tax rebate of up to $540 if you contribute on their behalf.
- Avoiding exceeding your contributions cap: The cap on concessional contributions (before tax) is $25,000. Exceeding your contribution cap can leave you liable to penalty tax, so it is certainly worth looking at your position prior to the end of June!
- Don’t leave yourself short: If you are likely to be under the contributions cap, and are in position to make additional payments, it may be in your best interests to make the maximum payments available prior to 30 June. If your personal tax rate is more than 15%, taking advantage of the cap may mean an extra tax saving.
- Review your Salary Sacrifices: Be aware that salary sacrificing into your superannuation fund affects your concessional contribution cap, and with the increase in Superannuation Guarantee from 9 to 9.25% on 1 July, there is the potential for salary sacrificing to push you over the cap from 1 July. Don’t forget this to review!
- Review Your Insurance: As mentioned earlier, the End of the Financial Year is an ideal time to look not only at your tax commitments, but also your overall long-term financial plan, including insurance. You can organise this through your super fund, but need to also consider additional contributions to make up any shortfall.
- Time it right: To have deductible contributions counted for this financial year, they must be received by the trustee by 30 June. Remit these contributions a number of days prior to ensure they are received in plenty of time.
- Self-employed contributions: You can claim a 100% tax deduction for any superannuation contributions you make if you are fully or substantially self-employed. Contact your financial adviser to see if you are eligible as this is a great way to save tax.
- Splitting your super contributions with your spouse: Recent proposed changes mean that evening up your super balances makes sense. To split your contributions, a request needs to be submitted to the member’s fund.
If you are close to retirement
- Add extra to your super: If you have surplus funds outside of your superannuation fund, consider making additional contributions into your fund. The cap for non-concessional (after tax) contributions is $150,000 per year but if you are under 65, you can make contributions up to a $450,000 limit at any time over the course of the current year and the following two years without being penalised. This is particularly important for anyone close to 65 who wants to make maximum contributions prior to turning 65.
- Consider a ‘Transition to Retirement’ pension: Workers who are over 55 can access up to 10% of their super as a “Transition to Retirement” pension (TTR pension) and can potentially save considerable tax. However, if you exceed the 10% limit, penalties will apply.
- Business Concessions: If you are thinking about selling a small business and retiring, you may be eligible to use one of the several small business capital gains tax concessions. Some and possibly all of the proceeds may be able to be rolled into super, reducing or even eliminating the capital gains tax applicable on the sale.
For Trustees of self-managed super funds (SMSF)
- Be compliant: Ensure that you have completed all the necessary paperwork for the SMSF. Confirm that the fund’s strategy is documented and investments are aligned with the strategy. Ensure the investment strategy considers members’ insurance needs.
- Minimum pension payments: Make sure that the minimum pension payment has been taken by June 30 or the fund will be considered to be in the accumulation phase for the whole year and pay extra tax. Minimum pension amounts vary based on age, so a close check on this is worthwhile to ensure you are minimising tax.
- Transferring investments into super: With changes to the regulations for in-specie (non-cash assets such as property and shares) transfers into an SMSF due to take effect on July 1 2013, there is likely to be a rush on transfers prior to that date, so don’t wait to the last minute. Basically, transfers after June 30 will need to done on market where possible or by an independent valuer if no market exists.
- Are reserving strategies worth the risk? The ATO is looking closely at this strategy (delay paying contributions from June into member’s accounts until the following year to avoid exceeding the contributions cap and being hit with the excess tax) and will require an explanation other than, ‘To avoid tax!’
Points to consider for your records
- Paperwork: If you find yourself scrambling through paperwork to keep a track of your tax deductions, consider revamping how you keep your records. Scanning receipts, electronically storing these or even having a separate bank account to keep a track of expenditure that can be claimed will help you maximise your tax refunds each year.
- Important Note: An important point to remember in any conversations about tax planning is that this year, June 30 falls on a Sunday, so any strategies or contributions need to be finalised by Friday June 28 to be included in the 2012/13 financial year.
Look at this End of Financial Year as an opportunity to discuss your financial future with your financial planner, not just as a time to minimise your tax. Take the time to consider your superannuation, insurance, investments and retirement plan as well as your tax return.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and has been recently named the Australian Adviser of the Year. Olivia's advice is general in nature and readers should seek their own professional advice before making any financial decisions.
Send your finance questions to Olivia at email@example.com.
- Aspire Retire In the Media
- Financial Planning News and Blog
- Personal Finance
aspire retire financial services
Brisbanes Best Financial Planner
Brisbanes Top Financial Planner
CEO's and Executives
financial planning brisbane
financial planning melbourne
financial planning perth
financial planning sydney
- May 2019
- February 2019
- December 2018
- May 2018
- December 2017
- August 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- September 2016
- July 2016
- June 2016
- May 2016
- March 2016
- October 2015
- June 2015
- May 2015
- March 2015
- February 2015
- November 2014
- September 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013