Time to Minimise your Tax
Written and accurate as at: May 23, 2023 Current Stats & Facts
Time to minimise your tax.
It’s that time of year again when those who are looking to build wealth are reviewing strategies to minimise their taxation expenses prior to the 30 June deadline. Whether you own a successful business, are on a good salary or have had a once-off taxable transaction such as selling an asset and triggering a capital gain, there are a variety of legitimate, legal strategies to help minimise your tax bill or boost your refund.
Tax minimisation is all about creating tax deductible expenses to offset taxable income and therefore reduce tax payable. If an individual is in the top personal tax bracket, they are paying 47% income tax and therefore any tax-deductible expenses are really only taking 53 cents in the dollar out of their pocket as the Government is funding the remainder.
Spending a dollar to save 47 cents tax only makes sense if the expense is part of a logical, broader investment strategy that will deliver an acceptable return to the investor on the 53 cents they have contributed. This return may be in the form of capital growth on a portfolio of traditional passive investments such as shares and property inside or outside super, and ultimately in the form of passive income streams from these investments at a later stage of life to replace earned income. The science is in researching and finding tax deductible expenses which have a realistic prospect of delivering the required return with an acceptable level of risk.
Common strategies include utilising the superannuation tax structure, negative gearing programs or prepaying expenses. Superannuation is a simple savings and investment scheme for your retirement after 60 years of age with huge tax benefits when you contribute and in retirement. Negative gearing is borrowing to invest into shares or property, which is inherently riskier than a saving plan but suits some people. Prepaying might be a farmer toping up their fuel or fertiliser account or prepaying interest for 12 months on your tax-deductible loans to bring the extra interest into this year.
30th June is just around the corner. It’s time to get serious about your strategy.
For a free consultation with local people who understand the complexities of these or any other financial matter, contact Eclipse Financial Planning at Cannonvale on 49467359 today or visit www.eclipsefp.come.au
