Q: Do you have any suggestions to help reduce my tax bill for this year?
A: The key to reducing your tax bill for this year is to put the following changes in place before July 1 because while tax returns aren’t due until at least the end of October, you tax is calculated on your income and expenditures for the year to June 30. Salary sacrifice is a good option to reduce your tax bill because superannuation income is taxed at 15% rather than your existing income tax rate, which is likely to be in between 32.5% and 47%. You will need to have a conversation with your employer because not all employers allow salary sacrifice, and you will also need to ensure you don’t exceed your concessional contributions cap (which from 2017 onwards is $25,000 per annum including contributions from your employer) otherwise you may face ATO penalties. If you own an investment property that you are considering selling it would be best to delay the sale until July because capital gains are added to your taxable income for the year in which the sale occurs so delaying the sale will delay the resulting tax obligation. Alternatively, if you have an asset that would sell for a loss, selling before June 30 will allow you to offset the loss against any capital gains you may have. Capital losses can’t be offset against other income, but can be carried forward to future years so it isn’t an issue if you have no gains to offset them against immediately. Other tax reduction options include prepaying interest and insurance premiums and maximising your deductible expenses. For a full list of what you can and can’t deduct visit the Income and Deductions section of the ATO website.
As published in the Western Suburbs Weekly