Top five tips to prepare for the end of financial year
17 May 2017
By Shadforth Financial Group
With the end of financial year approaching, here are some tips to help you be prepared.
1. Keep your receipts
The most common reason why people don’t take advantage of tax deductions is simply because they don’t keep receipts. While keeping receipts for big ticket items is necessary, you don’t always need a receipt for the smaller items such as stationery and books. If the total amount you are claiming for work related expenses is $300 or less, you need to be able to show how you worked out your claims, but you do not need written evidence.
2. Negative gearing
Negative gearing is another strategy used to manage tax liabilities. Geared investments use borrowed funds, therefore enabling a higher level of investment than would otherwise be possible. Negative gearing refers to the cost of borrowing exceeding the income generated by the investment. This difference is an allowable tax deduction. If you borrow to invest in shares you may obtain imputation credits which can be used to further reduce the amount of tax you pay.
3. Use a capital loss to offset your tax
The timing of the sales of assets (such as shares) can greatly affect your tax position. If you sell an asset because they are no longer appropriate for your circumstances and incurring a capital loss, the capital losses can be offset against any capital gains you have realised throughout the financial year allowing you to manage your CGT liability. If you don’t have a capital gain to offset, unused losses can be carried forward to offset gains in future years.
4. Salary sacrifice into superannuation
Superannuation can be a tax-effective investment. If you’re an employee, you could look at contributing to superannuation through salary sacrifice, thereby reducing your taxable income. In the long term, salary sacrificing has many benefits as it not only helps to increase your superannuation savings but could also reduce the amount of tax you pay. You could even salary sacrifice your annual bonus into superannuation, but this needs to be arranged in advance with your employer.
5. Claim your medical expenses
Whilst the Net Medical Expenses Tax Offset is being phased out from 1 July 2019, the offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses above the relevant threshold until this date. Your Medicare financial tax statement will help you claim the offset in your tax return. The statement shows you how much you have paid for medical expenses and how much you have claimed back from Medicare. This offset is also income tested.
Speak to us for more information in preparing you for the end of financial year.