Are you anticipating a large tax bill this year? Nobody gets excited about the prospect of sharing too much of their hard-earned money with the government. There are a few ways to reduce your bill and these are worth considering as you plan for the end of the financial year. If your circumstances are complex it's always wise to get advice to ensure you are maximising your situation, whilst staying compliant.
PRE-PAY EXPENSES
Prepaying up to 12 months of deductible expenses can bring the deduction forward to the current financial year. Things to consider are prepaying interest on an investment loan or paying your insurance upfront for the next year. If you have been paying your insurance in monthly instalments this year, paying for next year up front means you can claim two years of insurance premiums this year.
Keep in mind that this will increase your profit for the following year so is most beneficial when you know the following year is unlikely to yield a higher taxable profit than the previous year.
SUPER CONTRIBUTION OPTIONS
Salary sacrificing
This strategy involves directing some of your pre-tax income into your super fund. In Australia super contributions are taxed at 15%, which is generally lower than your marginal tax rate.
There is a cap on concessional contributions and this year it has increased from $27,500 to $30,000
Unused concessional cap carry forward
Legislation changed on 1 July, 2018 allowing for unused concessional contributions to be carried forward for a maximum of 5 years.
For example, if you didn’t pay any superannuation contributions for FY2021, FY2022, FY2023 and FY2024 then you may be entitled to make deductible super contributions to the value of $137,500 in FY25. If your other taxable income was $327,500, this could save a maximum of $64,625 in personal Tax for the FY25 year.
Spouse contributions
If your spouse (husband, wife, de facto or same-sex partner) is a low-income earner or not working, chances are they’re accumulating little or no super at all to fund their retirement. The good news is, if you’d like to help them by putting money into their super, you might be eligible for a tax offset, while potentially creating additional future planning opportunities for both of you. The receiving spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.
End of financial year always creeps up on us. Being organised is the key to reducing your tax bill. If you would like some help, please get in touch.
General Advice Warning: The information provided in this article is general in nature and does not consider your particular investment objectives, financial situation, or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial Services (Gympie) Pty Ltd ABN 48 931 205 109 and Dobbrick Financial Services (Ipswich) ABN 86 100 184 521 & DFS Oakland ABN 64 340 527 395 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
