How to minimise your tax?
Tax time again! What a great time to explore ways to minimise your tax or even save on tax. Please note that we are not qualified tax agents, but here are some ways you can legitimately try to save on your tax this year.
Consolidate any small super funds you have
If you have multiple super funds, it’s probably a good idea to consolidate them all into one. You’ll only be paying one set of fees, and you’ll find your money easier to manage.
If you’re currently being charged a fee on each of your super funds, bringing them together could save hundreds of dollars a year in fees. Some super funds charge an annual fee of around $300 — if you have three or four different accounts, that’s $1,200 you’re paying in fees each year.
Of course, if any of the funds have insurance with favourable terms, make sure that it isn’t lost in the shuffle.
There are also tax benefits to consider: if you have multiple small accounts, each with sub-$10,000 balances, the account fees will be eating into your retirement savings at a much faster rate than someone with just one account.
Self-employed and want to save on tax
if you’re self-employed and you’ve had a good year, try to access any deductions you can in that year rather than the next.
For example, if you’re buying a new computer or smartphone this year, claim the deduction this financial year and pay tax on the profit. If you delay claiming the deduction until the next financial year, the profit from those sales will be taxed this financial year and next.
Also, consider prepaying any lease or rental expenses for up to 12 months ahead. Again, this will mean your deductions are available sooner rather than later.
On the other hand, if you’re expecting lower profits next year than this one, it might be worth deferring some income until the next financial year. This can be done by delaying invoices or work payments until after June 30.
Make contributions to your super fund
Superannuation is one of the best investment vehicles for Australian taxpayers because it offers unique tax benefits.
There are a few ways to make contributions to your super fund:
You can make after-tax contributions, which will increase your super savings and aren’t taxed.
You can salary sacrifice part of your salary into your super account. While your employer doesn’t make any additional payments, it reduces your taxable income, resulting in a tax saving. These are known as concessional contributions.
Your employer must pay 9.5% of your salary into a complying super fund. This is known as the Superannuation Guarantee (SG) and forms part of your concessional contribution. If you’re self-employed, you can choose to make these contributions on behalf of yourself.
Review your investments regularly
With the financial year coming to an end, it’s a good time to review your investments, especially those made for tax-saving purposes. This will help you plan better for the next financial year and make some minor adjustments if required.
One of the most common mistakes investors make when it comes to tax planning is that they don’t review their tax-saving investments often enough. They set up a portfolio in February-March and then forget about it until the following year.
As such, several investors are likely to be surprised when they look at their tax-saving portfolio this time around. They may have received far lower returns than their expectations, or they may have realised that they have invested in instruments with high risk but little scope for diversification.