Sydney Finance Expert Announces Five Simple Tax Effective Strategies

May 13, 2009 - PRLog -- Speaking from his financial office headquarters in Sydney, Gabriel Nakhl, Director of http://www.SydneyFinancialAdvisers.com.au , one of Sydney’s better performing financial planning companies recently gave the following advice on strategies that can be used to effectively minimise the amount of tax that is owed to the taxman this year.

A summary of what Mr Nakhl said is as follows:

“As we approach the end of the financial year, it is important to review your financial situation to ensure that you are making the most of available tax effective strategies. Below are some options that you may like to consider:

1. Lowering your taxable income – review your personal income to see if some income should be postponed to the 2010 tax year in order to access a lower tax bracket. For example, if you have received a termination payment or redundancy package you may find it worthwhile to postpone this until after June 30, particularly if you expect your income in the next financial year to be lower.

2. Super contribution options - Although super balances have been hit hard by the financial crisis, superannuation remains the most tax-effective way to build wealth. Contributing to super can often provide substantial tax benefits, although it is important to note that limits may apply to the level of contributions that can be made without additional tax being incurred. Some considerations include:

• Salary-sacrificing - Swapping some salary for increased employer super contributions remains one of the best strategies to reduce income tax while at the same time maximising future retirement benefits. This is certainly a strategy to look at if you have a marginal tax rate of 30 per cent or more and you don’t require the contributed money until retirement. For example, bonuses or other lump sum payments placed in your super means tax is paid at 15 per cent rather than the marginal income tax rate. You should consider taking advantage of this strategy in this financial year since unfortunately, this strategy is unlikely to be possible in future financial years, with salary sacrifice contributions proposed to be included in the definition of ‘income’ for co-contribution purposes from July 1, 2009.

• Personal Concessional Contributions - For those not receiving a salary or who earn less than 10 per cent of their income from eligible employment, you can reduce income or capital gains tax by making personal super contributions. Like salary sacrificing, concessional contributions provide an equivalent tax benefit if you are substantially self-employed or not working. This type of contribution is created by making a personal contribution to super, then submitting an approved form to your fund electing to treat some of your contributed money as a concessional contribution. A full tax deduction then applies for the amount of the concessional contribution.

• Transition to Retirement or TTR Strategy – This involves replacing salary with payments from a TTR pension and increasing salary sacrifice contributions. For those aged over 55, a transition to retirement allocated pension means earnings and capital gains are tax-free within the superannuation fund, although tax of 15 per cent is still payable on deductible contributions.

• Government co-contribution - The government co-contribution is a scheme where the Government will contribute 150 per cent of an eligible client’s personal after-tax contributions during a financial year, up to a calculated maximum. The Government’s calculated maximum is $1,500 less 5 per cent of any assessable income and reportable fringe benefits that a client has above $30,342 (reduces to $0 when income reaches $60,342).

• Ensure your super contributions are paid on time – this may sound like a no-brainer, but in some cases, people who have mailed checks in early June have found out later on that their super companies had not banked their cheques till after 1 July! If you can, pay your superannuation contribution via direct debit so that postal delays (or human ones) can't be blamed.

3. Take advantage of Government tax breaks – Part of the Federal Government’s stimulus package is a tax break on the purchase of depreciable assets by businesses. It is a one-off deduction for eligible assets purchased between December 13, 2008, and December 31, 2009, and installed for use before the end of December 2010. This could include computers and laptops, mobile phones, motor vehicles used for business purposes, and any asset owned and not leased that would normally qualify for depreciation. Under the proposal, eligible small businesses will be able to claim an additional tax deduction of 30 per cent for new investment in tangible depreciating assets used in running a business worth at least $1,000. The investment must be undertaken between December 13, 2008, and June 30, 2009, and the asset must be ready for use in the business by no later than June 30, 2010.

For any small businesses that cannot qualify for the 30 per cent additional tax deduction, a 10 per cent deduction will apply where the same new investment is made between December 13, 2008, and December 31, 2009, and the asset is ready for use in the business by the end of December 2010. Businesses that are not eligible small businesses can access a similar set of bonus deductions, with the exception that new investment of at least $10,000 is required.

4. Give and you shall receive - One of the most effective - and productive - ways to minimise tax is to make a donation to a worthy cause. Find a charity you'd like a support, ensure they offer tax deductions (not all charities do this so make sure you check first) and you'll know that your money is going to a good cause.

5. Pay your tax on time! – You will be surprised on how many people procrastinate and neglect this very simple strategy. The ATO is getting more stringent nowadays, and you cannot afford to be lax. Late lodgement/payment penalties leniency has all but stopped. This means that the ATO is enforcing the $220 late lodgement penalties for activity statements, and this penalty can increase if your activity statement is more than 1 month overdue. Also, threatening demands and court summons are being issued, so if your financial affairs are not in order, sort them out quickly.

Other deductable tax considerations to review:
• income protection insurance is 100 per cent tax deductible;
• work-related expenses, such as training courses or uniforms, can be deducted for tax purposes;
• a tax deduction is available if interest is prepaid for less than 12 months;
• for those without private health insurance who are earning more than $50,000 (or with a combined family income of $100,000), the 1 per cent extra Medicare surcharge is payable; and
• there are still approved managed investment schemes that enable investors to reduce their taxable income. Ensure the scheme has a current product ruling by the ATO and that the investments are in accordance with this ruling

More information on tax effective strategies can be found by calling 1300 463 462 or by visiting http://www.SydneyFinancialAdvisers.com.au where Mr Nakhl also presents a video presentation on wealth building.

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Sydney Financial Advisers specialise in tailoring financial solutions to meet each individual's personal and financial situation. Our approach is to support you achieving your short term financial goals, whilst planning for your long term future.