Tax Minimisation Strategies
It’s almost that time of the year again when we all go into a frenzy to try to find our receipts so that we can claim on our work related or investment related expenses.
Before I go into this topic I would like to stress a point on tax deductions, which is: it’s only a percentage claim based on your marginal rate of tax. What that means is that if you have $100 worth of expenses and your marginal rate of tax is 30%, then effectively that would only equate to a refund of $30. This is why I stress the point, that where possible, you would try and get reimbursed for that expense by your employer.
Motor Vehicle Deductions
By far the best deductions available will be if you kept a log book for your motor vehicle expenses.
This method allows you to claim a percentage of all motor vehicle running costs such as petrol, insurance, repairs & maintenance and depreciation.
There are other methods but this by far is the best and I would recommend you put the effort into maintaining a log book as it could result in extra dollars in your back pocket!
Rental Property & Investment Loan Interest
If your loan allows it, you could prepay your next 12 months interest repayments before 30 June to obtain a tax deduction on your rental property, or investment income.
Depreciation Reports – Rental Property
Often missed by clients is obtaining a Qualified Quantity Surveyor to conduct a valuation of your fixtures and fittings that are in your rental property such as Blinds, Carpets, Light Fittings etc. Most of these items lose value over a period of time and that loss of value is known as depreciation which you can claim in your tax return.
If your building qualifies for the deduction you may also be entitled to 2.5% depreciation on your residential property and 4% on your commercial property for the decline in value on the Building.
The newer your property is, the more this depreciation amount will be, which again will add to your expenses resulting in a higher refund than you otherwise would have had.
The cost of obtaining the report is also allowable as a deduction.
If you are self-employed you could contribute up to $30,000 per annum into Superannuation, $35,000, if ages 50 and older. If we use the same marginal tax rate of 30% again that would mean you would get a reduction in your tax bill of $9,000 based on that $30,000 contribution.
Use 50% discount Method on Capital Gains
If you have a rental property or shares you are considering disposing of, you may want to assess the availability of the 50% Capital Gains Discount.
If you are an individual, provided you have held that investment for 12 months or more you will be entitled to a 50% discount on any capital gain. For example you sold the investment and the gain was $100,000, then only $50,000 will be included in your income tax return which will be taxed at your marginal rate and the other $50,000 is, essentially, not taxed.
This is a method to consider as the tax benefits can be quite substantial.