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.
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.
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.
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.
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.
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 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?
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.
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.
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