With only a week to go until the end of the financial year it’s now time to check all those last-minute tax saving actions have been completed. Whether its super contributions, pre-paying expenses such as investment loan interest, or donations, there are many possibilities to consider.
Super contributions must be in the fund in this financial year to qualify for a tax deduction, and super funds have firm cut-off dates by which applications must be received to allow adequate processing time.
Any person up to age 65, and up to 75 if working, can make super contributions and claim a tax deduction for them. The contribution limit is $27,500 including employer SG amounts. So people can top up to the limit by putting a lump sum equal to the difference into their fund.
This will usually generate a healthy tax refund. People whose total super balance was under $500,000 at June 2023 can also catch up amounts they were entitled to put in in the last five years but didn’t. This is very attractive for those who can use a really large tax deduction.
People can also make a super contribution for their low-income spouse and earn a tax rebate for doing so. The maximum contribution is $3,000 for a $540 tax bill reduction.
The Government Co-contribution scheme means any low earner who puts $1,000 into their own super account without claiming a deduction will attract a $500 contribution from the Government into their fund.
For people with larger lump sums available, super is a very tax-efficient investment even without an initial tax deduction. There are limits and maximising amounts in each financial year brings big benefits.
The ATO allows taxpayers to pre-pay business and investment expenses for the next year now, and claim a deduction for them in this year. A common strategy for those with investment loans is to pre-pay the interest on them for the next year and claim the deduction now.
The interest could be on an investment property mortgage, a loan to buy shares, or a margin loan for managed funds and equities. Any other expenses can also be pre-paid, such as property repairs and maintenance.
For investors who have realised some capital gains in this tax year, on share sales for example, it might be smart to sell some loss-making investments to reduce the net taxable gain. The investments can be bought back again in July if desired.
Now is the time to make large donations to the many deserving charities. Most people give a few dollars here and there through the year. Some can afford to give hundreds, even thousands to their favourite causes. Now is the time to do that.
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