End of Year Tax Tips for 2010

The end of the tax year is fast approaching and many people scramble to reduce the dreaded tax bill. Paying money to the tax office that could have been used to benefit your own position can be painful, however there are still some last minute tax strategies that can help you and hopefully with effective tax planning for next year you can reduce your need to panic when June rolls around again.

INVESTMENT

Reduce your Capital Gains

If you have received a capital gain from your investments, a review of your investment portfolio could help you to determine whether there is a poorly performing investment that no longer suits your circumstances and which could be sold. The capital loss can offset the capital gain you made and help you save tax, while also freeing up money for more suitable investment opportunities.

Pre-paying Deductions

Pre-paying 12 months’ income protection insurance premiums can bring forward a tax deduction and lead to paying less income tax for this financial year. However, you must remember that pre-paying deductions in a lump sum to reduce tax may be beneficial on a year of higher than expected income but your cash flow position over the following years also needs to be planned out in order to avoid coming up short the next year. 

Pre-paying Interest

A review of your loans may present an opportunity to pre-pay interest.  By pre-paying 12 months’ interest on an investment loan you can bring forward your tax deduction and pay less income tax for the current financial year. As long as the borrowing is used for investments that will generate assessable income, you are entitled to claim a tax deduction for the interest payable on your loan.

SUPERANNUATION

One of the most effective tax strategies is the use of superannuation contributions. Not only is it an investment into your retirement it also gives you many tax advantages.

Government Co-contributions

If you make a personal contribution to super before June 30, you may be eligible for the government to match your contribution on a dollar for dollar basis, up to $1,000.

Salary Sacrificing

Salary sacrificing means that you sacrifice part of your net income into your superannuation fund instead of receiving it in your take home pay. However, a salary sacrifice agreement must be in place with your employers and it can not be backdated.

Spouse Super Contributions

If your spouse is on a low income you can make a contribution to their fund and you may be able to receive a tax offset. This offset can be a direct saving against your tax liability. 

Always review superannuation contributions to ensure that limits are not reached and tax deductions are maximised.

Tax planning should be done as a long term strategy instead of having the tax year coming to a close and asking yourself “how much tax can I save right now?”. By not planning ahead it can make any investment decisions vulnerable and unsustainable. The key to tax planning is having it tailored and structured correctly to ensure long term benefits to yourself and your investments.

If you would like help in reaching your full potential, please contact our office on 5522 9500.

 Article Dated - 2nd June 2010

Written by - Alex Warren, Mango Wealth Creation

Mango Wealth Creation provides Financial Planning Advice as a Corporate Authorised Representative (346128) of Partnership Financial Services Pty Ltd ABN 90 009 015 874 AFSL 220381

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