[EOFY]: 11 tax planning tips to save money at the end of financial year
DG Institute founder and CEO, Dominique Grubisa explains how to prepare for tax time and save a LOT of money as we approach the end of financial year.
Some people would rather hear the words ‘root canal therapy’ than ‘tax planning’, but they might never be wealthy. (Though they might have lovely teeth.)
I say tax planning is fascinating and wonderful and if you think otherwise, let me convince you in five words: it saves you serious money. There! Interested?
Most HNWIs (that’s High Net Worth Individuals, or sophisticated investors with more than $10 million in investments) know that tax planning happens in May at the latest – and usually well before – ready for the end of the financial year.
In this video I’ll outline for you what kinds of tax planning you can do as a budding entrepreneur:
If you own property, you might want to think about some simple tactics:
1. Repairs & Maintenance
Fix that scraping door or old microwave now and you can get back a share of the money in July rather than waiting another year.
2. Insurance premiums
If you prepay your insurance, including landlord insurance; you can claim it all this financial year. You may even get a discount for paying the full amount in advance rather than monthly installments.
3. Prepay Interest
You can prepay a year in advance and bring forward the tax deduction to this year.
That’s usually a great idea, however you need to look carefully at this option right now because interest rates are tipped to drop in coming months, and you don’t want to pay out on a higher rate for a year when you could have months of discounts.
It’s possible to get tax deductions for fixtures, fittings, building costs – carpets, curtains, even garbage bins, and the birdbath in the garden.
Since 2017 the rules changed and you can’t deduct second-hand items anymore. You also can’t deduct travel expenses to visit your rental property but it’s still worth deducting what you can.
You may want to get a depreciation report to see what you can qualify for. The report will cost around $700 – and the cost of the report is a tax deduction.
You could get a quantity surveyor’s report which allows you to claim a Division 43 building write-off.
And check out the free Rental Properties guide from the Australian Tax Office, which explains negative gearing, capital gains tax, rules about what you can claim, etc.
5. Check your loan
While you’re thinking about finance, this is a great time to compare your loan.
There are some great new low interest rates out there. Some lenders have sharpened up since the Banking Industry Royal Commission. Some banks are even offering a $2000 cash rebate for each security transferred to them.
Also, banks are now relaxing a bit and there are some interest only loans out there, both for owner-occupiers and for investors. At DGI Finance, we have access to more than 30 different lenders, including some niche products that aren’t sold retail.
We can access:
- An investment loan, interest only, fixed at 3 years from 3.74%
- An owner-occupied loan (principal and interest) with 100% offset 3.59%
Now, here are some tips that apply not just to property owners:
6. Consider capital gains tax
Capital gains tax applies when you sell an asset for a profit (or capital gain). If you’ve owned the asset for more than 12 months, the ATO gives you a discount and you pay only 50% of the tax.
Plan your decisions as much as you can so you don’t get a huge income in one year. You might be able to time a sale to a year when your income is lower or you have a large number of deductions.
7. Think about how you’re structured
Should you own this asset yourself solely, or in common with someone else, or in a company like a trust? The answer might be complex and will depend on your personal circumstances, so it’s wise to have professional advice but getting this right can really help at tax time.
Setting up a trust doesn’t have to involve huge effort or expense or government charges. It can be done through a simple trust structure that puts body armour around your assets.
8. Use your super
Some people don’t know that you can use your super fund to help you offset the loan you take out on your first home. That drops the interest you pay.
9. Self-Managed Super Fund (SMSF)
Should you set up a self-managed super fund? Some people think that’s ridiculously expensive and hard to administer, but you can do it for about $600 and have your accountant handle the extra bit of reporting.
If you already have a self-managed super fund, you should check how it’s going and make sure you make any contributions before June 30.
10. Tame your paperwork – then reward yourself
The better your records, the better your chance of getting tax deductions. If you spend an hour setting up a clear filing system and then stick to it, you will probably be very highly paid for that hour.
The faster you get returns in, the faster you get your refund. Remember the time value of money now rather than in a few months.
11. Do your own income tax planning
Talk to a good accountant about issues like:
- Salary packaging
- Your superannuation
- Investing in shares that offer 100% franked dividends
- Small business and capital gains tax exemptions (particularly relevant to superannuation)
Enjoy your tax planning – you’ll be glad later when it saves you money.
To book a free initial consultation with any of the DG Institute divisions, please email us at firstname.lastname@example.org or visit our websites for more details:
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at email@example.com
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.