As we plan for the 30th of June 2019 and what to do moving forward, we are writing a 3 part series on preparing for this deadline and getting ready for doing your tax return.
This series is for individual clients – businesses have other issues to consider and we’ll be dealing with them soon.
In this first part of the series, we consider the major items that need more time to implement if you want to take advantage of the strategies before 30 June 2019.
These are the top 5 strategies to consider as follows:
Strategy 1: Review and Prepay Interest on Investment loans
If you have an Investment loan which is used to fund an investment property or shares, you are able to pay the interest in advance for the next 12 months and claim the tax deduction in the current financial year.
This can be effective in a number of instances, including:
- If you have more income this year, and are retiring or expecting your income to reduce next year;
- If you want to bring a tax deduction forward into this year as you received a one-off bonus or other income; and
- If you made a capital gain on an investment.
This can also be an effective time to review the structure of your home loans so that they are the most tax effective that they can be.
Due to the time that it takes to deal with bank regulations and rules, we recommend reviewing this strategy as a priority. As we are tax accountants and finance brokers, we can assist you with the review of the strategy and implementation.
Strategy 2: Prepay Income Protection insurance premiums and reduce this year’s tax
Depending on your situation, you may want to consider your Income Protection insurance. Income Protection insurance premiums are generally tax deductible as they are protecting your income for the future.
You may want to pay your premiums for your Income Protection insurance for 12 months in advance, so you can:
- Bring forward your tax deduction; and
- Pay less income tax this financial year.
Strategy 3: Check the Ownership of Investments
Many clients hold assets such as Term Deposits or shares. If you are the legal owner of an asset, you are likely to be taxed on it. We therefore recommend reviewing the way that your investments are held and considering if it’s worthwhile having the investments held in the lower income earning spouse’s name, in order to save tax.
Mortgage Offset Accounts should also be reviewed, and their use. Generally, Offset Accounts reduce the amount of interest that you pay, whereas income from funds held in a bank account that pays interest is taxable income.
So, if an Offset Account is reducing the amount of interest payable on your home loan, you are saving interest on a non-tax deductible expense. Having the monies held in a separate standard bank account and not offset, can mean that you’re paying tax on a small amount of interest and not utilising the offset to its full advantage.
Strategy 4: Review your Investment Capital Gains and Losses
If you have already realised Capital Gains this year from your investments, you may want to trigger a capital loss by selling a poorly performing investment that no longer suits your circumstances, so you can:
- Use the capital loss to offset your taxable Capital Gain and save tax; and
- Free-up money for more suitable investment opportunities.
Strategy 5: Defer asset sales to save tax
If you are thinking of selling a profitable asset this financial year, you may want to defer the sale until a future financial year, so you can:
- Defer paying Capital Gains Tax (CGT); and
- Reduce your CGT liability.
If any of these strategies are of interest to you or you have any others you’d like to talk to us about – We can help! Contact the AAG team today on (08) 9227 6300 or email to learn how we can assist you with your individual needs.
Important information and disclaimer
This publication has been prepared by AustAsia Group, including AustAsia Accounting Services Pty Ltd (Registered Tax Agent No 7587 3005), AustAsia Financial Planning Pty Ltd (AFSL License No 229454) and AustAsia Finance Brokers Pty Ltd (Australian Credit Licence No 385068).
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.
Information in this publication is accurate as at the date of writing, 29 May 2019. Some of the information has been provided to us by third parties. Whilst it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility, for any errors or omissions in this document.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.