With the end of the financial year drawing to a close, financial experts are suggesting that the last week of June may be the ideal time to get your finances in order before the taxman comes knocking. Sorting out your financial affairs now could save you money, especially when it comes time to pay your tax.
If you have tax deductible expenses that are due and can be claimed this financial year, then pay these now. Then you can claim them in 2015-16 fiscal year, instead of 12-months later.
This strategy is ideal if you are expecting a hefty tax bill, as you will possibly reduce what you will have to pay to the taxman. You may also find that making a payment now will reduce any capital gains made on property and other assets, especially if the bill is related to the asset.
One of the most common property payments you can make is the pre-payment of investment loans or loan margins. However, financial experts say that before making any payments, you need to do your homework. For instance, if you pre-pay interest you will need to agree with your bank on the amount that needs to be paid. You also need to work out if its more beneficial for you to pay the payment earlier or wait until its due.
Its also important to note that the Australian Tax Office (ATO) has said that it will be paying close attention to interest claims and those that appear excessive may be flagged. Therefore, if you are claiming any rental property deductions, financial experts say that it is important for you also to include all rental income, as well as expenses. You must also ensure that your property was available for rent at the time of the deduction. The ATO cannot stress enough that you must have records for any claims that you make.
If you belong to a professional body or subscribe to a magazine that is work related, then these are classified as work expenses. The same applies to tools purchased to use at work or courses that benefit your job. Therefore, pre-paying for subscriptions, tools or a course now, which will run into the next financial year, makes sense.
Government legislation currently allows you to pay a voluntary contribution of up to $30,000 into your superannuation before tax if you are under 50-years-of-age. If you are over 50, then you can pay up to $35,000 into your super. However, on July 1, 2017, voluntary superannuation contributions before tax, will be capped to $25,000.
Superannuation contributions can be made a number of ways. These are as follows:
- If you are self-employed, then you can make a lump sum payment into your super and then claim a 15% tax deduction.
- If you are an employee, you can ask your employer to arrange for a salary sacrifice payment, and you will only be taxed at 15% for the contribution.
- If you earn less than $50,454.00, then you may be eligible for a tax co-contribution into your superannuation. To claim this payment, all you need to do is deposit $1000 of your pay, after-tax, into your super fund and the government will automatically add an extra $500 to your super account.
If you are a self-managed super fund member, and you are self-employed, then you can bring a contributions reserving strategy into play. This approach allows you to double your pre-tax contribution limit for a financial year. This method is beneficial for individuals who have made a significant capital gain.
For those who have a super-biased annuity, and who have met the minimum drawdown rules, you may be able to withdraw an additional 5 to 14% of your pension. If you are under the age of 65-years, and you are transitioning to a retirement pension, then you can withdraw between 4 to 10% from your account during the 2015-16 financial year.
Do you want to know more about tax time savings and property? If you said YES, then contact eChoice. We can help you save now and well into the future.