Wealth Creation, Tax and ‘EoFY’

This time of year gets a little crazy in the run up to the end of financial year. With the 30th June being the final date to maximise tax deductions in this current financial year it it time to start planning to ensure you get a good taxation outcome.

Here is my guide to reviewing your wealth creation plans in the run up to ‘EoFY’!

Review your portfolio and capital gains / loss position

If you have any capital losses on the books or capital gains now maybe a good time to review the holdings and trim any profits.

Where your capital gains are more than your capital losses you may need to implement a strategy to manage your tax position before 30 June.

Boost any income deductions on your investments before end of financial year

If you have an investment property or share portfolio which has a loan attached it is a good time to review any upcoming costs and see if you can bring forward any income deductions to this current financial year.

This can include revisiting your loan amounts and interest rates (shop around for the best rate) and look to consolidate any property and share loans to reduce the interest you are paying while also boosting your deductions this financial year.

Prepay Income Protection insurance for the next 12 months to bring your deduction forward

If you have income protection insurance in place and you are paying month to month, now may be a good time to try and pay an annual premium amount to bring forward the deduction to this income year. Cash flow will be the key here, along with any debt optimisation you can being into play (see below for more details).

Prepay interest on a investment loan to enhance your deductions and increase your investment capital

If you have not invested in the past but always look at your group certificate and wonder where it all went now is the time to take action. Educate yourself, understand the investment products and strategies that are out there and most importantly get good fee for service advice.

Debt Optimisation is the key

The key to getting a good taxation outcome is that you use any tax returns wisely and by this I don’t mean on a holiday or other personal expenses. If you have debt including your mortgage pay this non-deductible debt down first and use the taxation savings to optimise your overall position.

A small portfolio loan of $20,000 can result in a tax saving to you of up to $900 (depending on your tax rate). Even this small amount of additional repayment on your mortgage each year can reduce your borrowing term and overall interest payments.

On an average mortgage of $350,000 this additional amount each year could save 4 years off a 30 year loan and $45,000 interest.

If you need assistance in exploring these further talk to a professional but most importantly start your journey to being free around your money and creating wealth with understanding.

Scott Malcolm (scott@money-mechanics.com.au) is Director of Money Mechanics (ph: 6257 5557) a fee for service advice firm who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.

The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.