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Get your finances in shape this tax year
Your employer may give you the opportunity to contribute money, up to your age-based limit, toward superannuation from your before-tax pay. Contributing before-tax means that the money contributed to super is only taxed at 15% rather than your current tax rate. So, contributing your bonus to super could mean investing 85% of it rather than losing a larger portion in tax if you take it in cash. Get the Government to co-contribute If you earn less than $58,000 this financial year, you may be able to use your after-tax contributions to super to qualify for Government co-contributions. You could get up to $1,500 extra in your super account from the Government. If you’ve taken out any extra insurance cover through your fund, a co-contribution might reimburse you for the extra cost.
Hold off receiving extra income until after 1 July 2006 From 1 July 2006, a new set of tax scales applies if your assessable income exceeds $63,000. Delaying a redundancy or the realisation of a capital gain until after Contribute to your spouse’s super You may be entitled to an 18% tax rebate on after-tax contributions you make to super on behalf of your spouse, with a potential maximum rebate of $540. Have health cover and save tax If you earn over $50,000 as a single or over $100,000 as a couple and you have no private health insurance, you may be liable to pay the Medicare Levy Surcharge. This surcharge adds 1% in tax on every dollar you earn. So if you’re planning to get married and your combined income will exceed $100,000, consider having some private health insurance so you don’t get slugged with the Medicare Levy Surcharge. Replace income with tax-effective benefits If your employer lets you salary package, it can be used tax effectively to receive salary as a combination of income and other benefits. Benefits you may be able to package include personal contributions to super, cars, car parking, mobile phones, laptops, protective equipment or other tools of your trade. Make the most of those deductions Geared investments, shares, interest costs, ongoing costs incurred to derive income and even some capital losses will generally be tax deductible. Depending on your total income and tax bracket, bringing forward those costs or crystallising those losses before 30 June 2006 creates potential to claim a greater tax deduction than will be allowed next year when the tax scales change. Be more strategic with your charity Charitable giving can be a rewarding experience personally as well as financially. Consider making larger donations to one or two charitable organisations each year rather than making small contributions to people collecting donations on the street or over the phone. Choosing a registered charity and keeping receipts for donations over two dollars will usually make your donations tax deductible for you. Protect your income Income protection, sometimes called salary continuance, is a way of insuring up to 75% of your income if you are temporarily disabled. If you hold a personal policy, the premiums you pay are generally tax deductible and may reduce your taxable income. Where a policy is paid for by your employer on your behalf, no tax deduction is available. Get a refund on medical expenses Have you paid more than $1,500 in medical expenses during the year after claiming from Medicare and your health fund? If so you may want to track down those receipts because you may be eligible to claim the medical expense rebate. This tax rebate is equal to 20% of your out of pocket medical expenses, over $1,500. Claim the maternity bonus – but don’t wait too long Are you having a baby or was your baby born in the last six months? If so, you can currently claim a $3,119 maternity bonus via Centrelink – but you have to do it within 26 weeks of your child’s date of birth. The maternity bonus is increasing to $4,000 from 1 July 2006 and to $5,000 from 1 July 2008.
NOTE: You should talk to your tax adviser before making any decisions on the above information.
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Achieve is issued by Russell Investment Management Limited (RIM), ABN 53 068 338 974, AFSL 247185. In preparing this information we haven’t taken into account your own personal circumstances, including what you want and need for your financial future. It is important for you to consider these matters and also to obtain and read the relevant PDS before you decide whether to acquire or to continue to hold a product. Go to www.yoursupersolution.com.au to download a PDS. Interests in Russell SuperSolution are issued by Total Risk Management Pty Ltd.
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With the end of the financial year coming up, consider these tips for getting your finances in shape and hopefully shedding some unwanted tax debt. 