Ashlee Watson Editor
Don’t leave tax return preparation to the last minute. Here are some strategies to ease the pain at 30 June.
A lot of people leave their preparation for the end of the financial year until it is too late. If your finances could do with a shake-up before 30 June, there are plenty of options for you to ensure that the process runs as smoothly as possible.
Keep your receipts
The most common reason why people don’t take advantage of tax deductions is simply because they don’t keep receipts. While receipts for big ticket items are necessary, you don’t always need one for the smaller items such as stationery and books. If the total amount you’re claiming is $300 or less, you need to be able to show how you worked out your claims, but you don’t need written evidence.
Protect your salary
Income protection insurance is an essential part of any financial plan, designed to secure your family’s lifestyle in the event of illness or injury.
Premiums are generally tax deductible, so if you purchase income protection insurance and pay your annual premium before 30 June, you may be able to include the deduction in this year’s tax return. Business owners may also be able to claim deductions on their business insurance premiums.
Claim your uniform
If you’re a tradie or wear a uniform for work you might find the clothes or the laundry expenses are tax-deductible.
Split your income
Investing in your spouse’s name can reduce, or even eliminate, the amount of tax paid on the investment income. This is true if your partner has a lower marginal rate of tax or is earning less than $20,542 pa .
Splitting income with your partner can be as simple as having your savings (excluding your everyday bank account) in the name of the partner with the lower marginal tax rate.
Insure your health
The Government made significant changes to the Medicare levy surcharge and the private health rebate from 1 July 2012. If you’re currently paying the Medicare levy surcharge and want to avoid it in the future, consider taking out private health insurance before 30 June to avoid paying the surcharge again.
Even though you might have private health insurance, you may find, based on your circumstances and income, your private health rebate has reduced this financial year. To ensure that you understand the full impact, contact your health fund for more details.
Make a sacrifice
Superannuation can be a tax-effective investment. You could look at contributing to superannuation through salary sacrifice. In the long term, this not only helps to increase your superannuation savings but could also reduce the amount of tax you pay as it reduces your taxable income. Even bonuses can be salary sacrificed into super, but this needs to be arranged in advance with your employer.
Additionally, the reduced salary amount that you actually take home would then become your assessable income for tax purposes. This may enable you to move down a tax bracket, reducing your amount of total tax payable.
Concessional contributions, or those made with pre-tax money, are currently limited to $30,000 per person per year. If you were 49 or over on 30 June 2014, this cap increases to $35,000.
Of course, there are many other strategies you can put in place based on your individual circumstances and financial goals. Speak to us to take the stress out of your tax planning.
Call us on 132 888 or email [email protected] to get started.