Individuals: Last-minute tax planning tactics

This financial year is almost over, but there are still tactics you may be able to employ to make sure you pay the right amount of tax for the 2014-15 year.

While the best strategies are adopted as early as possible in a financial year it’s worth remembering proper tax planning is more than just sourcing bigger and better deductions. The best tips involve assessing your current circumstances and planning your associated income and deductions.

No-one knows your affairs better than yourself, so you will recognise if any of the following tax tips apply to your circumstances. But no-one is better informed as to what is appropriate or allowable than your tax agent (and don’t forget, any fee is an allowable deduction in the year it is paid) so please speak with us regarding which strategies suit you best.

Investment property

Expenses stemming from your rental property can be claimed in full or in part, so it can be helpful to bring forward any expenses that can be undertaken before June 30 and claim them in the current financial year.

Pre-pay investment loan interest

If you have some spare cash, see if you can negotiate with your finance provider to pay interest on borrowings upfront for the investment property or margin loan on shares (or other loan types), and allow a deduction this year. Most taxpayers can claim a deduction for up to 12 months ahead but there are a few technicalities to consider so ask us if you want to know more.

Timing of expenses and income

  • If you have planned that next year you will be earning less (for example, due to maternity leave or going part-time) then you will be better of bringing forward any deductible expenses into the current year.
  • If you expect to earn more next financial year it may be to your advantage to delay any tax-deductible payments until next financial year.

It’s probably leaving it a bit late to adopt this strategy now, but there may be tactics for July that can take advantage of this sort of timing. For example, place money into a term deposit that matures after June 30 so interest accrues to you in the next tax year.

Use CGT rules to your advantage

If you have made and crystallised any capital gain from your investments this financial year (which will be added to your assessable income), think about selling any investments on which you have made a loss before June 30.

  • The gains you made on your successful investments can be offset against the losses from the less successful ones, reducing your overall taxable income.
  • For CGT purposes a capital gain generally occurs on the date you sign a contract, not when you settle. When you are making a large capital gain toward the end of an income year, knowing which financial year the gain will be attributed to is a great tax planning advantage.
  • Of course, tread carefully and don’t let mere tax drive your investment decisions.