Tax Planning for Individuals
It is that time of year where all people should be considering tax planning. Tax planning is about saving tax and knowing well ahead of
time how much tax if any will fall due the following year.
By saving tax, you are able to free up cash flow for other things, like paying down debt, contributing to super, investing, or even going on a holiday!
Why not consider some basic measures:
Salary Sacrifice to Super - This is a great way to reduce your tax if you are in a tax bracket of 20% or more, because it enables you to place your pre-tax salary into super rather than having it taxed at your marginal tax rates. If you are on a current salary sacrifice arrangement, this may need reviewing on 1 July due to changes in legislation.
Income Replacement Insurance - We all know that in the event of illness or accident these things are put at risk if we don’t have appropriate income protection insurance in place. For those clients who do not have this insurance, consider taking out before 30 June and get the full tax deduction in the current year. JKA can now assist clients obtain this insurance.
Motor Vehicle Expenses - If you use your car for any work related purpose, you can claim up to 66 cents per kilometre up to 5,000 km travelled in a year. If you claim motor vehicle costs using a log book, it is important to keep it up to date and if more than 5 years old, commence a new one for at least a 12 week period.
Work Expenses - Bring forward your work related costs. Now is the time to look for receipts or credit card statements proving expenditure on work related items such as: – Uniforms, tools of trade, Union Dues, memberships of professional associations or trade groups, telephone used for work purposes. If there are any items that can be paid prior to 30 June, do so in order to get your tax deduction.
Defer Income or Capital Gains - If possible, arrange to sign contracts for sale of shares or property which are giving positive returns after 30 June 2018. Of course, we understand this is not always possible, but deferring income or capital gains into the next financial year is a sound strategy.
If you normally receive a bonus or commissions, get these deferred until after 30 June.
Quantity Surveyors Report for Investment Properties - The tax office won’t accept estimates on values by you, accountants, or real estate agents. They will accept a Quantity surveyor’s estimates. Their report lists claims you can make for depreciation and the cost of constructing the building itself. The cost of these reports is generally recovered several times over in the first year by the tax savings they generate. The cost is also tax deductible. The depreciation benefits are less so for older properties, therefore may not be beneficial in these instances. There are also upcoming changes to depreciation rules and investment property, so please contact us for more information.
Sell Loss Making Investments - If you have an investment that has lost money, and other investments which may have made a gain, then selling the loss making investment will help reduce the tax on any gain. If you feel the investment will turn around later you can always buy it again.
Prepay Expenses on rental properties or investments can be pre-paid before 30 June. Therefore, you can pay for expense such as repairs, pest control, cleaning, tree lopping etc. before the end of the financial year.
These are some general tax planning measures. However, at JKA we always consider other more client specific measures.
If your accountant is not talking about tax planning, give us a call and let’s start saving tax.