Tax Tips Daily June 2021 Archives - Finness Advisory

Blog

Tax Tips Daily June 2021

A dividend that comes with credit

Some dividends that are paid to shareholders have a refundable tax credit known as a franking credit.

This simply means that the company has paid tax on company profits and the tax credit attaches to the dividend when paid to the shareholder.

A tax deduction that is often overlooked

Having a property depreciation schedule performed on your rental property by a qualified quantity surveyor, who produces a depreciation schedule for your Accountant, can literally save you thousands of dollars in tax each year.

It’s money for nothing and many property investors either forget about it or simply have their local accountant knock together a “best guess” schedule that rarely maximises your deductions.

Trustee resolutions make sure its done to avoid 47% tax.

If you have a trust as part of your business group, it’s absolutely paramount that the trustee resolution for the trust is prepared and signed ON OR BEFORE 30 JUNE 2021.

This sets out how the trustee (usually the business owner) will allocate the current year income to the beneficiaries of the trust.

In other words, it sets out who gets the income and this will impact what tax they will ultimately pay.

𝐂𝐨 𝐂𝐨𝐧𝐭𝐫𝐢𝐛𝐮𝐭𝐢𝐨𝐧 – 𝐰𝐚𝐧𝐭 $𝟓𝟎𝟎 𝐟𝐨𝐫 𝐅𝐑𝐄𝐄? …𝐖𝐞𝐥𝐥 𝐬𝐨𝐫𝐭 𝐨𝐟.

If your partner earns taxable income of less than $39,837 (up to maximum threshold of $54,837) and you put an after-tax contribution of $1,000 into super, the government will kick in $500. It’s a no brainer if you’ve got the cash.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐥𝐨𝐬𝐬𝐞𝐬 – 𝐰𝐚𝐭𝐜𝐡 𝐭𝐡𝐞 𝐭𝐢𝐦𝐢𝐧𝐠

Nobody wants to make a loss but if it’s inevitable, you should know how to utilise it to reduce your tax bill. Capital losses can be offset against capital gains reducing your taxable income but you need to get the timing right.

If you sell an investment and make a capital loss, this loss can only be offset against current year capital gains or carried forward against future year capital gains. The key thing to understand is that you cannot carry back a capital loss to a previous tax year.

𝐏𝐚𝐲 𝐲𝐨𝐮𝐫 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐞𝐬 𝐬𝐮𝐩𝐞𝐫 𝐚 𝐥𝐢𝐭𝐭𝐥𝐞 𝐞𝐚𝐫𝐥𝐢𝐞𝐫

In a previous blog we spoke about the timing of expenses and the Robin Hood effect.

Another option to bring down your taxable income in the current year is to pay staff their super a little earlier. This is ideal if your taxable income is high this year but may be lower next year.

𝐓𝐡𝐞 𝐑𝐨𝐛𝐢𝐧 𝐇𝐨𝐨𝐝 𝐄𝐟𝐟𝐞𝐜𝐭

The more you make, the more they take!

If you are earning $35,000 a year, you are currently paying 19% tax on every dollar made until you hit a certain income level. If you are earning $180,000, you will be paying 47% tax on every dollar made above this.

So, what can we do with this in mind?

𝐃𝐨𝐮𝐛𝐥𝐞 𝐝𝐢𝐩 𝐟𝐨𝐫 𝐬𝐮𝐩𝐞𝐫

In the last post I mentioned you can generally claim a tax deduction of up $25,000 for super contributions paid in the year (increasing from 1 July 2021 tax year to $27,500)

However, if you have a self-managed superfund (SMSF), you could potentially get a tax deduction for super paid of up to $52,500 in one year. i.e. using the contribution cap of two years in one year.

𝐑𝐞𝐝𝐮𝐜𝐞 𝐲𝐨𝐮𝐫 𝐭𝐚𝐱 𝐚𝐧𝐝 𝐛𝐨𝐨𝐬𝐭 𝐲𝐨𝐮𝐫 𝐬𝐮𝐩𝐞𝐫

Superannuation contributions are a no-brainer at this time of year. You can make a lump sum contribution to your super that’s tax deductible (up to a maximum of $25,000).

This is ideal if you’re looking to lower your taxable income and especially helpful if you’ve got a capital gains tax event this financial year.

𝗗𝗼𝗻’𝘁 𝗴𝗼 𝗯𝗿𝗼𝗸𝗲 𝘁𝗿𝘆𝗶𝗻𝗴 𝘁𝗼 𝘀𝗮𝘃𝗲 𝗺𝗼𝗻𝗲𝘆

Around June each year, we are normally inundated with messages and advertisements telling us how we can save this tax time.

You may have heard someone at the BBQ trying to justify their latest purchase by saying something like “I was told I can write that off in my tax” or “Sur I can claim that back”. Well kind of..