With the end of the fiscal year approaching sooner by the day, it is a better time than ever to start thinking about ways you can effectively save on tax. With our experienced advisors at Endorphin Wealth, we have come up with three simple tips that will help you minimise your tax.
1. Claim all available tax deductions
You may be able to claim a tax deduction for many of your expenses. These may include:
- donations to registered charities or non-profit organisations;
- self-education expenses;
- premiums on income protection insurance;
- work-related expenses.*
*The range of permissible work-related expenses varies widely from occupation to occupation.
Refer to the Australian Tax Office (ATO) website www.ato.gov.au for full details.
2. Contribute to superannuation
Superannuation contributions can reduce the level of tax you would otherwise have to pay on your investments.
Salary-sacrificed or pre-tax concessional contributions made into your super are generally taxed at 15%. If your assessable income together with concessional contributions exceeds the income threshold of $250,000, your concessional contributions may be taxed at a total of 30%.
You may also be eligible to claim a tax deduction for contributions made to super. To do this, complete and submit a notice of intent to claim or vary a deduction for personal contributions form (NAT 71121) and receive an acknowledgement from your superannuation fund.
As there are also other eligibility criteria that you must meet, it pays to seek advice smsf investment advice from your financial advisor.
3. Manage capital gains
Capital gains are made by selling investments at a profit. Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations.
When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year.
If you have a potential CGT liability, there are a few strategies that you could consider to reduce the amount you need to pay.
Keep an investment for at least 12 months
Investors are entitled to claim a 50% discount on capital gains on assets that are held for longer than a year. By holding on to the investment for more than 12 months you will halve the CGT payable.
Delay any gains until the new financial year
If you are thinking of selling a profitable asset, such as shares or property, it may be worth deferring this sale until after the end of the financial year. By doing so, you will delay incurring CGT for another financial year. While you will need to pay the CGT eventually, freeing up short-term cash flow may be beneficial, depending on your circumstances.
Use carry-forward tax losses to reduce CGT
Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years. This can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you.
Where to learn more about reducing tax
The team at Endorphin Wealth have both the experience and knowledge to help keep your tax liability to a minimum.
The advisors at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by the big banks and financial institutions, so the advice and solutions we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers to ensure that our clients’ needs are our primary focus. Our offices are located in Sydney and Melbourne, where you can find a financial advisor suitable for you.