END OF FINANCIAL YEAR

Top 5 proven strategies to
 
reduce tax and build long-term wealth

 

Strategy 1
Enhance your wealth through tax effective borrowing

Borrowing to invest in assets that provide income now can build your long-term wealth in a tax-effective manner. This could be assets such as shares or property.

• You can make a larger investment by using borrowed capital.
• Claim the interest and other expenses on the investment loan.
• You may be able to use the deduction, along with the income generated, to assist in funding the investment.
• You can protect your investment utilising various capital protection strategies.

Strategy 2
Save tax this year by bringing forward next year's expenses

By bringing forward expenses that would otherwise be tax deductible in the following financial year, you can reduce your taxable income in 2009/2010.

• If you borrow money to invest, you could pre-pay 12 months' interest and claim the whole interest amount as a tax deduction this financial year.
• You can incur business expenses or deductible expenses pre June 30, such as income protection insurance by pre-paying up to 12 months premium.
• Donations to registered charities not only make a difference to society, but are tax deductible as well. You may even choose to finance that donation.

Strategy 3
Manage your Capital Gains Tax (CGT) and losses

Have you sold or are considering selling an asset this financial year?

• If you have sold an asset this year and have incurred a capital gain, you can offset the CGT by selling a poorly performing asset before June 30.
• If you hold assets in your name you can sell that asset to your Super fund, thereby reducing tax.
• By selling an asset that is underperforming, you could incur a capital loss and therefore offset the capital gain.
• You can choose to defer the sale of an asset until after June 30 to avoid incurring CGT this financial year.

Strategy 4
Use Superannuation to manage your tax

You can use your Super Fund to reduce your overall tax obligation this financial year.

If you are employed 

• By salary sacrificing some of your pre-tax salary to super, your contributions will be taxed at a maximum rate of 15%, as opposed to the highest marginal rate of 46.5%.
• You can make investments in your Super fund.
• Use pre-tax dollars to purchase life and permanent disability insurances.

If you are self employed

• You can claim your super contributions as a tax deduction, regardless of whether they are used to purchase investments or insurance.
• By selling an asset and contributing the money into super, you could claim a portion of this contribution as a tax deduction.
• You can reduce or eliminate your CGT liability by using the Super tax deduction to offset this.

Strategy 5
Consider alternative ownership arrangements for your assets

Apart from holding assets in your own name or in a Super fund, there are other entities that can hold the investment.

• You can establish a family trust to own assets and distribute income.
• If you have an employee share scheme, you can transfer those shares into a spouses name if they are on a lower marginal rate.
• If shares represent a significant portion of your wealth, you can take out capital protection or borrow against those holdings to fund the purchase of options or shares to add diversification to your portfolio.

Contact us today to discuss which strategies can help you reduce your tax and build your long term wealth.