It is becoming more difficult to reduce your tax payable in today’s environment. However, there are still a few key strategies available to you.

1.       Borrowing to invest – negative gearingHand with taxes word isolated in white

Negative gearing is where you borrow to invest and the costs of the loan and investment are greater than the income generated from the investment. The most common types of assets people borrow to invest in are property and shares.

With interest rates currently at a record lows most people are finding what normally would have been a negatively geared investment now being positively geared and negating the benefits of the strategy. That is, the income generated from the investment is greater than the costs and hence increasing the amount of assessable income for income tax purposes.

2.       Contribute to superannuation

Currently the maximum amount anyone can contribute to superannuation pre-tax is $25,000 per financial year. Pre-tax contributions, also known as concessional contributions, include employer contributions and salary sacrifice contributions.

These types of contributions are deducted from your salary prior to tax being paid and are only taxed at 15% in your superannuation fund. Therefore an individual on the highest tax bracket of 46.5 cents in the dollar (including Medicare) could save themselves up to 31.5 cents in overall tax by salary sacrificing to super.

3.       Income Protection

Premiums for income protection are fully tax deductible. Income protection is a type of life insurance that protects you in the event where you can no longer work due to sickness or injury. Income protection policies can provide you with a monthly benefit up to 75% of your income. The monthly benefit may be payable up to the age of 70.

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

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