Preparing for the end of the financial year
Investor Insights 14 May 2015

The intelligent investor knows that taxation planning is a critical driver of portfolio outcomes. With life both speeding up and becoming progressively more complex, it is more important than ever that we all stay ahead of the taxation planning curve.

What is more, tax time can be a useful trigger for a broader review of your financial position. This annual review – whilst not sufficient in itself to ensure investment success – can be a critical time of reflection and recalibration of investment strategies.

In this edition of Investor Insight, we look at some of the key taxation and strategic issues that investors may wish to address over the last two months of the financial year.

Tax tips

Prepay interest on investment loans

Some lenders allow borrowers to prepay interest on investment loans. Where this is the case, the prepayment of interest may enable you to bring forward the interest expense to offset taxable income. Prepaying interest can also allow you to ‘lock in’ a fixed rate of interest, providing budget certainty. Investors should be aware that lenders may charge a fee for the prepayment of interest and should consider this expense in any decision.

Manage capital gains and losses

Investors should seek advice as to whether carried forward capital losses can be used to offset capital gains realised during the year. Similarly, selling securities that you have held for at least twelve months (that qualify for the 50% CGT discount) may be a relevant strategy to utilise any capital losses that you may have incurred. In addition, deferring or bringing forward the planned sale of an asset may be beneficial depending on your individual circumstances.

Maximising deductible expenses

Investors should ensure that they are maximizing the deductions they are able to claim from expenses incurred in earning assessable investment income. Expenses that you may be able to claim include fees for financial advice, account keeping and management fees and interest payments on investment loans. Income protection insurance may also be tax deductible.

Reviewing and prepaying your income protection

Income Protection Insurance is an important consideration for those clients with families, outstanding debts and/or a single main income earner. The Australian Taxation Office generally allows the cost of any premiums paid to insure the loss of your income to be claimed as a deduction. In addition, premiums pre-paid for up to twelve months in advance may be deductible in the year that the expense is incurred.

Rental property deductions

Landlords can claim deductions for a range of expenses such as advertising, bank charges, body corporate fees, cleaning, council rates, electricity and gas, gardening, insurance, loan interest, land tax, lease preparation expenses, legal costs, pest control, postage and stationery, property agent fees, telephone charges and water rates. You may also be able to write off the cost of certain buildings, depreciating assets and borrowing costs over time.

Efficient use of superannuation strategies

Superannuation provides a tax-efficient environment for your retirement savings. Depending on your personal circumstances, increasing the amount of wealth you hold through superannuation by making additional contributions, either through salary sacrifice or lump sum contributions, may be worthwhile. These additional contributions are capped for the 2015-15 financial year at $30,000 (or $35,000 for those aged 49 or over on 30 June 2014). As you may remember from last year, in a very welcome recent change, unintentional contributions above this cap can be withdrawn and taxed only at the investor’s marginal tax rate. This is a significant change that will take a lot of the ‘guess and stress’ out of the end of financial year form SMSF investors.

Optimise your tax offsets

Tax offsets directly reduce your tax payable and can add up to a sizeable amount, so it pays to know all the offsets to which you are entitled – particularly given the significant changes announced in the recent federal budget papers (which, it should be noted, are yet to be legislated and so are subject to change). Eligibility for offsets will generally depend on your income level, family circumstances and other relevant conditions associated with particular offsets or rebates. Common tax offsets include the dependant spouse rebate, low-income tax offset, mature-aged worker rebate, senior Australian tax offset, medical expenses offset, private health insurance offset, the entrepreneur’s tax offset and the offset for superannuation contributions made on behalf of a low income spouse.


Making a tax deductible donation to Deductible Gift Recipients (DGRs) can represent an alternative strategy for those seeking to reduce their tax liability prior to the end of the financial year. If you have a deeper interest in philanthropy, other strategies to consider include creating a Private Ancillary Fund or establishing an account in a Public Ancillary Fund. Donations through both of these structures are tax deductible.


Review your investment strategy

Is your investment mix still properly suited to your needs? Do you have the right mix of ‘growth’ and ‘defensive’ assets? Have you thought through how much money you will need to be able to retire in comfort? Do you have adequate access to liquid cash to deal with emergencies like unexpected medical expenses or loss of income? Are you over-exposed to volatile asset classes, where sudden market movements can have a significant impact on your portfolio?

In recent years, more and more investment professionals have been preaching the importance of life cycle investing. There is a very good reason for this. With the onset of the GFC, many investors with a large portion in investments in growth assets saw a large portion of their portfolio disappear, resulting in the delay of retirement and the return to work of those who had previously retired. Many investors who were unable to return to work were forced to dramatically change their lifestyle to cope with their reduced income.

This financial year may be the perfect time to consider whether your investments provide sufficient protection for your future.

Gearing strategies

Gearing is certainly not for everyone. It can be high risk. But when used with care and intelligence, it can be a powerful portfolio tool. It can increase returns, enhance tax efficiency and even de-risk portfolios by adding to overall portfolio diversification.

Insurances – are you protected?

Insurance is an important part of any retirement planning strategy. Investors can protect against some of life’s unexpected battles by having proper life, total and permanent disability and income protection insurance in place. These policies are generally tax deductible and can often be paid through superannuation.

As always, we recommend that you consult with your accountant or financial advisor before making any investment decisions.

Best regards,

Chris Andrews
Chief Investment Officer

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Ratings And Awards

The above awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed

La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.

- The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund and may be lower than expected. Investors risk losing some or all of their principal investment. The investment is not a bank deposit.
- Past performance is no guarantee of future performance.
- Withdrawal rights are subject to liquidity and may be delayed or suspended.
- The award and ratings were given to the Pooled Mortgages Option within the La Trobe Australian Mortgage Fund.
- Any rating is only one factor to be taken into account in deciding to invest.

1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
3. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at Thomson Reuters Copyright, All Rights Reserved.
4. Australia Ratings (AFSL 346138) makes every effort to ensure the reliability of the views and rankings expressed in its reports and those published on its websites. Australia Ratings research is based upon information known to it or which was obtained from sources it believed to be reliable and accurate at time of publication. However, like the markets, it is not perfect. This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each rating for their own specific circumstances and realise that not all investments will be appropriate for all subscribers. To the extent permitted by law, Australia Ratings and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Australia Ratings hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.
La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 130 staff and has managed over AUD$10 Billion covering over 100,000 investment grade assets since inception in 1952.

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