Are you ready for tax time?

With the end of the financial year just around the corner, now is the time to make sure your financial affairs are in order.  There are a number of smart strategies you could consider to help you streamline you finances and minimise your personal tax liability.

Insurance Premiums - Some insurance premiums, such as those for income protection are generally tax deductible as an expense incurred in earning your income.

Work Related Expenses - Don't forget to keep any receipts for work related expenses such as uniforms, training courses and learning materials, as these may be deductible for tax purposes.

Prepay Margin Loan Interest - If you have a margin loan, you can prepay up to 12 months interest in advance (subject to prepayment rules). You can claim a tax deduction for the prepayment in this financial year, further reducing your taxable income.

Tax Deductions for Investment Expenses - Expenses you incur while earning assessable investment income may be a tax deductible.  These expenses can include fees for financial advice, account keeping and management fees and interest payments on margin loans.  Claiming a tax deduction for these expenses could reduce your assessable income for the financial year, although not all expenses are immediately deductible. your tax adviser can help your determine what can be claimed.

Review Ownership Structure of Investments - Transferring the ownership of your investments to your self managed super fund (if your fund accepts this) or to your spouse, could reduce the tax you pay on future investment income and capital gains.  However, these transfers have capital gains tax implications so you should seek tax and legal advice from a qualified professional before proceeding.

Managing Capital Gains - It's important to assess if you have made any capital gains or losses from your investments.  The most common way you make a capital gain (or capital loss) is by selling assets such as real estate, shares or managed fund investments.  Managed funds also distribute capital gains which you must report. The Australian capital gains tax system is quite complex so it's important to consult with your tax adviser.

Contributions to Super - Contributing to your super can be one of the most tax effective ways of building your retirement savings.  However you need to be extra careful not to exceed your concessional contributions cap and incur excess tax.

The government limits how much you can contribute to super in any one year.  The annual contributions caps as of 1 July 2009 until 30 June 2012 are:

• $25,000 per year for pre-tax contributions (concessional) if you are under age 50 on the last day of the financial year.  If you're aged 50 or over on the last day of the financial year, a transitional cap of $50,000 per financial year applies until 30 June 2012 (commencing the year you turn 50).
• $150,000 per year for after tax contributions (non concessional) or $450,000 over a three year period if you are under 65 in the financial year the contributions are made.

It's important to keep your financial planner informed about any contributions you make so they can ensure you don't exceed these caps.  Contributions made over these caps are taxed at a hefty 46.5%.

If you currently have a salary sacrifice or transition to retirement strategy in place, or are self-employed and make personal deductible super contributions, you should speak to your financial planner to discuss whether you can boost your contributions this financial year or review your current arrangement.

If you would like to know more about which end of year tax strategies may be appropriate for you, you should contact your financial adviser.  If you dont' have a financial adviser you can call our office on 02 4925 6125 Monday to Friday.  In conjunction with your tax adviser, we can work with you to ensure you are taking advantage of any available tax concessions and that your investments are structured in the most appropriate way.

Disclaimer: This general advice has been prepared without taking into account your particular financial needs,, circumstances or objectives, and is based on Financial Wisdom Limited's understanding of current law as at 14 April 2010.  While every effort has been made to ensure the accuracy of this information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. We are not tax agents and this article is not intended to be taken as taxation advice.