June has arrived and time is running out to take advantage of tax breaks before the 2010/11 financial year closes for business. Use the next few weeks to evaluate your tax position, work out what you can do to improve it and take action.
Offset capitals gains with losses
Half your profits from selling shares or investment properties will be charged capital gains tax at your marginal tax rate. Losses made on these kinds of investments can offset profits and cut your capital gains tax bill. So if you made a big profit on the sale of one investment this financial year, consider selling some of your disasters.'''Time your income carefully
At this time every year I usually say put off receiving income until next month if you want to delay paying the tax until the following financial year. This is a great strategy if you’re likely to earn less in 2011/12 and will therefore be on a lower marginal tax rate. If you’ll earn the same or more next financial year try to receive as much income as possible this month. From July the Flood Levy kicks in and you’ll be taxed an extra 0.5 per cent on income over $50,000 and 1 per cent on income exceeding $100,000.
Top-up your super
If you receive a bonus at the end of the financial year think about asking your boss to contribute it to your super instead of sticking it in your regular bank account. If you’re under 50 years of age you can make before-tax super contributions of up to $25,000 a year and pay just 15 per cent contributions tax instead of your regular income tax rate. If you’re over 50 you can contribute up to $50,000. The tax you save boosts your super balance instead of going to the taxman. Make sure you stay under the contributions limit or you could end up paying extra tax.
Also take advantage of the government’s co-contribution scheme for low and middle-income earners if you haven’t already. The government will match every extra dollar you put into super up to a limit of $1,000 each financial year.
Use the education tax refund
Now is the time to check whether your kids need computers, textbooks or stationary for schoolwork. Buy them before the end of the month and take advantage of the 50 per cent tax refund on eligible education expenses. This financial year you can claim expenses of up to $794 for each child in primary school and up to $1,588 for each kid in high school and get half your money back when you do your tax. You qualify for the Education Tax Refund if you receive Family Tax Benefit Part A.
Get your tax file ready
You want to claim all possible deductions to reduce your tax bill…but you need proof. Hunt down receipts for everything you’ve had to buy to do your job this year. If you work from home you can even claim some of your rent, internet connection and electricity bills. If you can’t find receipts but know where you spent the money go back and see if they can give you a copy of the invoice. Bank and credit card statements showing details of purchases can be used in some cases.After June 30 you will start to receive group certificates, investment property accounts, and receipts for regular charity donations and your private health insurance. Add this to your tax file and fill in your return with ease.