Only 12 Business Days Until the End of the Financial Year!

1. Save Tax by Investing in Super

Superannuation has the potential to be a very tax effective investment, and is one of the best vehicles to fund retirement. But what are some options to consider?

• Employees: Salary sacrificing into super. To ‘salary sacrifice’ means to contribute before-tax income, or to swap your salary for increased employer super contributions. This means that it is possible to avoid paying your own Marginal Tax Rate (or your income tax rate) in favour of the super rate of up to 15%. When you salary sacrifice your income into super, this type of super contribution is only taxed up to 15%. On top of this, salary sacrificing effectively reduces your assessable income – this could mean pushing your assessable income into a lower tax bracket and consequently paying less overall tax outside of super as well! For example, John is on a $90,000 salary (on a 39.5% Marginal Tax Rate (MTR). By salary sacrificing 20% of his income into super, his taxable income will reduce to $72,000, and income taxes paid will decrease by $6,470. 
• Self-employed: Claim your super contribution as a tax deduction. Since 1 July 2007, contributions for self employed individuals are 100% deductible but with limits of $25,000 in this financial year if you are under 50, and $50,000 until 2012 if you are over 50.

If you are considering a contribution to super, ask the SBS Team about the most beneficial timing and strategy for you.

2. Protect your Income

You insure your house and your car, but do you realise that your INCOME is probably your most valuable important asset to insure? Projected into the future, your annual income could be worth MILLIONS of dollars!

Unlike other insurance, Income Protection Insurance premiums are tax-deductible (when paid outside of super). Apart from giving you peace of mind should you experience unfortunate circumstances, this gives you another good reason to consider Income Protection where suitable. Income Protection costs around 1-2% of your gross salary pa, and in the case of accident or illness which prevents you from working, it will provide you with up to 75% of your income, up until age 65.

Your individual situation will be unique, so seek advice from the SBS Team on appropriate cover.

3. Can you Reduce your Capital Gains Tax?

Your capital gain is roughly equal to the profit made on an asset, or the difference between what you paid and the selling price. Assets that may attract Capital Gains Tax (CGT) can include real estate, business sales, shares in a company, units in a managed investment fund, and possibly even an inheritance.

• Timing: When is the best time to sell an asset? If you have held the asset for at least 12 months, your CGT could be cut by 50%. Also, selling assets in a financial year in which your income is reduced (eg when you retire) could mean paying CGT on a lower Marginal Tax Rate (MTR).
• Small Business: There are small business concessions for businesses owned for more than 15 years, which could eliminate your tax completely! Also, talk to the SBS Team about the CGT retirement exemption, which may allow a capital gain of up to $500,000 on the sale of small business assets held for less than 15 years to be exempted from CGT.
• Self-managed super funds: If you have assets outside of your SMSF, talk to the SBS Team about transferring them into your SMSF to take advantage of the low tax rate on earnings of 15% or less within the super environment. Also, CGT within super is reduced to a maximum of 10% on assets held for more than 12 months.
• Balance your gains and losses: Can you offset any capital gains with losses, for example, a loss from a previous financial year? Talk to the SBS Team about disposing of an asset that makes money in the same year that you dispose of an asset that loses money, so you could end up paying less in CGT this way as well.
• Reduce taxable income: One option is to reduce your taxable income to move into a lower income bracket, such as through salary sacrifice or a tax deductible personal contribution, which can effectively offset a capital gain. This means you can reduce or in some cases eliminate CGT.

What’s the next step? The sooner you speak to the SBS Team, the more time you will have to plan and to take advantage of possible tax benefits this financial year.

4. Borrowing to Invest

A margin loan can help you invest more money in shares or managed funds than you might have been able to without the access to the money the loan provides. With more money invested, the aim is that you also see higher returns on your investment.

• How is it tax effective? Using a margin loan can be a potentially tax effective strategy because the interest on the loan is generally tax deductible. Also, it may be possible for you to pay interest in advance, which will bring tax deductions forward, helping you with tax planning. The SBS Team can help you stay on top of tax benefits and your interest repayments, but make sure you review with your adviser regularly and plan ahead.
• What are the risks? Gearing into the share market or into the property market has the potential to increase your risks as well as the returns on your investment portfolio. Speak with the SBS Team to discuss your personal financial needs and goals.

What’s the next step? Make sure you see the SBS Team as early as possible before 30 June to make the most of possible tax benefits to Margin Lending.

5. Leasing Vehicles and Equipment for Business – Claim Back Your GST

Lease rental costs may be tax deductible, provided the equipment is used to generate assessable income for at least 51% of its use. The payments you make on a lease can extend over different tax periods, but each payment is treated separately for the purposes of each Business Activity Statement. You can generally claim the GST credit for a tax period when a lease payment is made in that same tax period. You may be able to claim the interest on your loan as a tax deduction, offsetting some of your interest costs.

Contact us TODAY for immediate action!

CLICK HERE to open our e-mail enquiry page to request immediate assistance from the SBS Team to help save you tax!

Kind regards

THE SPECIALISED BUSINESS SOLUTIONS TEAM

General advice warning: The advice provided is general advice only as, in preparing it, we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives.