Tax Planning - Top 10 Tips for Individuals!
This is part 4 and our final instalment of the tax planning series for this year. All good things must come to an end, and we are now in the last week before the end of financial year. The previous three instalments have been focused on businesses, and so this week, it is all about effective tax tips to help individuals legally minimise their tax.
1. If you are saving up for a home deposit, the last thing you need is for those savings to be chipped away at by a tax bill at the end of the year! Consider holding the cash in the name of the person with the lowest taxable income.
2. Interest income is generally taxable when it is received, accordingly if you hold term deposits, try timing the maturity date post year end to defer recognition of that income to the subsequent financial year.
3. If your property is entitled to claim depreciation, we recommend that you contact a business such as BMT Quantity Surveyors who can assist in providing a depreciation report which can be used to help reduce your rental profits. We also have a calculator on our website under resources to help you determine how much depreciation you may be entitled to claim.
4. Consider if you have adequate insurance for your situation, and if not look to pay for your policy before 30 June.
5. Have your tenants been bugging you about fixing up a few things around the place? Now is the time to get in and repair those minor issues so you keep your tenants happy and get the best bang for your buck when lodging your tax return for this year.
** A note about repairs, this is an area that the ATO is looking at carefully, so please ensure that any repairs are documented well to ensure you are able to verify it was a repair and not a capital improvement.
6. If you are holding shares that you are thinking about selling, consider if you have made any gains during the year. If you have realised some gains, then before year end is a good time to sell as you can offset your gains and losses to reduce any capital gains tax.
Cryptocurrencies such as Bitcoin
7. Same rule applies as #6 above, this is a big topic in itself, however remember that if you have made gains but you are hodling coins that are in a loss and you are considering selling, try timing the sale of the loss making coins in the same financial year as your realised gains to reduce your capital gains tax.
Superannuation contribution limits
8. Consider topping up your superannuation. The concessional contribution cap for the 2018 financial year is a flat rate of $25,000 per person (previously used to be a tiered system). Remember though that this includes the contributions currently being made on your behalf by your employer, and that this is part of your longer term wealth strategy and we always recommend talking to your financial advisor when considering if this is right for you.
Income Protection Insurance
9. If you have income protection insurance, you can claim your premiums as a tax deduction. Choosing to pay your full years premium before 30 June allows you to bring forward the tax deduction into this current financial year.
10. Family trusts are a common structure used for a variety of purposes. It is important to ensure that all income is distributed otherwise any undistributed income may be taxed at the highest margin rate. Circumstances do vary and so it is important that you seek the right advice, but tax planning is all about reducing the amount of tax payable and this is an easy one to get right.
If you would like any further information or would like specific advice, please do not hesitate to contact us.
Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.