Are you maximising your tax refund?
Whilst ‘tax time’ comes around once a year, effective tax planning should be considered year-round. Making tax planning a priority can result in you having a lower tax liability.
Here are some ways you can reduce your tax liability in your personal life:
1. Claim Deductible Expenses
As an individual, you’re entitled to claim deductions for expenses directly related to earning taxable income.
If you’re wanting to claim a work-related deduction, make sure you have a record (i.e. A Receipt) which proves the purchase was made.
2. Donate to Charity
Remember that monies donated to charity, or as a gift, may be tax deductible. Individuals can claim tax deductions for donations given to organisations that have the statues of deductible gift recipient (DGR).
The gift doesn’t always have to be money either – it can also be property – so long as it is truly a voluntary transfer where the giver has received no material benefit or advantage.
3. Consider Salary Sacrifice
Consider salary sacrificing to reduce your taxable income.
Salary sacrificing involves entering into an agreement with your employer to pay for some items or services straight from your pre-tax salary.
You can salary sacrifice a number of things, from;
- electronic devices,
- motor vehicles,
- private health insurance,
- super and so on.
Most employers will offer salary sacrifice to super but it is best to talk to you employer to see what other benefits they offer.
Salary sacrificing is available for anyone who earns more than the $18,200 tax-free threshold, however it is most suitable for individuals on mid to high incomes.
4. Hold Investments in a Discretionary Family Trust
If you’re a high-income earner, a discretionary family trust might be beneficial to you. This will allow you to redistribute some of your income to family members on lower tax brackets.
A properly drafted discretionary trust allows trustees to make distributions to the most appropriate members regarding their tax status
i.e. distribute more income to beneficiaries on lower tax brackets or those with no other income to utilise the $18,200 tax-free threshold.
Any capital gains that are made can be distributed to beneficiaries with capital losses available or who can use of the 50 per cent discount. Franked dividends may also be paid to beneficiaries who can use the imputation credits to reduce tax on other income.
5. Create a Mortgage Offset Account
A mortgage offset account allows individuals with a home loan to offset their non-deductible interest on the loan with the interest on the normal taxable earnings of money in a deposit.
It is an arrangement where individuals create a savings account with their lender. Instead of paying interest on the full home loan, individuals are charged interest on the loan minus the amount in the savings account.
6. Pay off your Home Loan
Instead of regularly depositing money into a savings account put it towards your mortgage as additional home loan repayments. This can save you paying tax on the interest earned in your savings account.
This will not only reduce the total cost of the loan, but you will be able to access those extra repayments through the loan’s redraw facility if you need extra cash.
Business Recovery Support
Businesses can struggle in both difficult and good times. This can be caused by economic cycles, failure of a large customer or a change in the market, which can be impacted by various external factors. Take the restrictions on trade imposed due to the COVID-19 pandemic as an example.
Failing to recognise or ignoring that the business is struggling, puts its continued operation at risk, leading to insolvency.
Signs that a business is struggling include:
- Being unable to pay bills on time
- Getting paid late or not at all
- Being unable to take a salary from your business
- Suppliers opting to only provide stock on cash terms
- Receiving demands for payment
- Hitting borrowing limits
- Missing BAS and or superannuation guarantee payments
- Not lodging tax returns
How do you avoid losing your business?
It’s essential to keep good business records and regularly review the with your business advisers. Additionally, we also recommend:
- Acting early when you first notice there is a problem. Don’t wait until you have a bankruptcy or winding up application served, or you are trading insolvently.
- Seek expert advice and act on it. Don’t take notice of family and friends who think they know better or have heard something to the contrary.
- Give all relevant information to your adviser – don’t hold back.
How we can help with business recovery
At Greenhalgh Pickard, our solicitors and accountants can provide expert and professional advice about business recovery and insolvency matters. We understand the need for accurate commercial advice and fast action when personal or business finances are at risk.
Our lawyers and accountants can also provide strategic tax advice, assist you in negotiations and where necessary, representation.
Contact us today to arrange an appointment.