Let’s dive into my top tips to help you lower your donation to the ATO this financial year.
You need to start planning as early in the financial year as possible.
A lot of people come to me after the financial year wanting to plan around lowering their tax bill for the previous year.
The problem is that once the date the line in the sand has passed, it’s very difficult to make any adjustments or do anything from that point onwards.
I recommend getting clear on what deductions you can claim as part of your job. These can include study costs, investment and tax advice-related expenses, interest costs, and work-related expenses.
Thousands of dollars in deductions are left sitting on the ground, not getting picked up. So make sure you’re clear by looking at the ATO guides on their website or talking to your tax professional.
Say, through the year, you sold an investment at a gain. And you also have another investment that’s gone backwards in value. If you’re no longer confident in keeping that investment, you can dispose of that asset, realise that loss, and offset your capital gains.
And you can carry that loss forward into future years and offset against future capital gains.
It has the added benefit of giving just a little refresh or tidying up of your investments.
If you pay for the whole expense in this financial year, you can claim that expense assuming it is investment, business or study related.
An important thing to note is that you only get the tax rate back, not the full expense. If you don’t have that planned expense in the pipeline, it’s not worth just going out and making an expense. So the idea is not to buy random things you don’t necessarily need.
The annual limit of tax-deductible contributions that you can put into your super is $27,500. This limit includes your employer contribution. So there might still be a little bit left, depending on what your employer’s putting in. Instead of leaving your contribution until the end of the financial year, you can make smaller contributions throughout the year so it doesn’t hurt your hip pocket so much.
There are other rules around where you can carry forward prior unused super contributions limits to help offset big gains. We’ve used this strategy with clients who’ve sold investments during the year.
Once the money is in super, the long-term earnings are at 15% instead of your marginal rate.
Lastly, note on that one, once the money is in super, it’s generally locked away with a key and you can’t get your mitts on it until you’re 60.
You must keep good records of your expenses.
The good old shoe box is fine. Or, you can take photos of your receipts and save them in your notes or on your computer.
So, when it comes to tax time, you aren’t scratching your head trying to remember your expenses throughout the year. It keeps you organised throughout the year and takes the stress and guesswork out of tax time.
Make sure you get advice from an accounting professional and financial adviser to squeeze the most out of your tax return.
This is not tax advice. Your personal objectives, needs or financial situation have not been considered when preparing this information.
You should consider the appropriateness of any general advice we have given you and, if necessary, seek advice before acting on it.
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