Get your calculators ready because it’s end of financial year time again! While tax planning is important to consider each year, it’s perhaps not the make or break event that many think it is. Regardless, we’ll run through some things you should be thinking about as we head into the final months of the financial year. Continue reading to see some of the common tips for investors.
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 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.
List your 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.
Superannuation strategies including additional contributions
Despite all the changes that have occurred, superannuation is still a highly tax-favoured environment in which to save and invest. There are a number of key issues that you should consider in managing your superannuation investments this financial year.
Manage your pension
Remember that pensions must make a minimum payment each year. If they don’t, the fund will potentially be taxed at 15% on its investment earnings. The minimum payment is based on age and a percentage of the assets. For pensions commenced through the year, the minimum pension amount is pro-rated based on the number prior to the end of the year on which it commenced.
Ensure that you are receiving available tax deductions
SMSF members in particular sometimes overlook available tax deductions (that are, of course, only applicable when the fund is in the accumulation phase and actually paying tax). These include insurance premiums for death and disability policies, accounting and auditing fees, costs of updating a trust deed to comply with the SIS Act, adviser fees, subscriptions, bank fees, filing fees and interest costs on borrowing arrangements.
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. 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.
As always, the above tips are a guide only and you should consult your accountant, financial adviser or taxation professional before acting on any of the comments presented in this newsletter.
Budget Announcement 2019
With the surprise win by the Coalition and with tax as one of the agenda items under the spotlight, the Coalition has promised to simplify the tax system and introduce rolling tax cuts across the wage spectrum to take hold between July 2019 and July 2024. The key tax policies that can directly affect Australians:
With the above said, the total projected tax cuts for low and middle income earners equates to $5.7 billion which is the largest piece of the pie in terms of the Coalition’s “Major Spending”.
About La Trobe Financial
With A$9 billion of Assets Under Management (AUM), La Trobe Financial is Australia’s premium non-bank specialising in credit and wealth management. La Trobe Financial provide funding and investment solutions to a diverse range of 150,000 customers and have done so since 1952. 80% owned by Blackstone, the world’s largest alternative asset manager, with over US$545 billion of AUM worldwide. We are a proven and trusted investment partner for institutional and retail investors alike, operating Australia largest retail Credit Fund ($4bn AUM and 40,000 retail investors). We have over 66 years’ experience, managing investment mandates in excess of $22.76 billion since commencement.
La Trobe Financial has been a leading innovator in the non-bank sector for many years including, pioneering “Lite Doc®” lending in Australia in 1990, creating the first private Reverse Mortgage (Seniors Loan™) in 2003, launching the first hybrid wealth management-loan product P2C® (Parent-to-Child) to assist first home buyers in 2013, introducing a unique to market Aged Care finance solution in 2015, and being one of the first lenders to introduce a fully digital KYC and AML checking of borrower applicants for brokers in 2017.
La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213 is the issuer and manager of the La Trobe Australian Credit Fund ARSN 088 178 321. It is important for you to consider the Product Disclosure Statement for the Credit Fund in deciding whether to invest, or to continue to invest, in the Credit Fund. You can read the PDS on our website www.latrobefinancial.com, or ask for a copy by phoning us on 13 80 10.
This publication does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and a general overview on matters of interest and it is not intended to be comprehensive. You should seek your own financial or other professional advice before acting or relying on any of the content. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.