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5 tips to help prepare for tax time

5 tips to help prepare for tax time

Here are some things you can do now, to help you prepare for tax time.

Things such as making superannuation contributions, prepaying expenses and revisiting your savings, budgeting and investing plans might help you prepare for the new financial year.

Make more deductible contributions to super

Now could be an ideal time to start making either additional personal concessional contributions or employee salary sacrificed contributions to your superannuation. As well as topping up your super, making such additional contributions may help you reduce your overall tax bill.

If you are under 75 years of age, you may claim a tax deduction for personal contributions. Please note these contributions are subject to the concessional contributions cap, which is administered by the Australian Taxation Office (ATO) and certain additional requirements for those between 70 - 74 years old (inclusive).

Prepay expenses

By prepaying tax deductible expenses for the next financial year you may be able to claim a tax deduction for certain expenses in the year that you incurred the expense. For further information in relation to prepaid expenses please refer to the ATO.

Manage your investments

If you're thinking of selling any investments, such as shares or managed funds, then the timing of the sale can have significant implications on the tax you may have to pay in any given year.

This is because any gain on your investment becomes taxable income and, depending on the size of the gain, may put you up into a higher tax bracket.

On the other hand, if you're planning to sell a non-performing investment, then doing so before 30 June might mean you’re able to use any capital loss to reduce the tax on any other capital gains.

Consider taking out private health insurance

Individuals and families on incomes above a certain level may be liable to pay the Medicare levy surcharge (MLS) for any period during the financial year that they did not have appropriate private patient hospital cover. The MLS is in addition to the 2% Medicare levy.

But you and your family can avoid this surcharge by taking out an appropriate level of hospital cover with an approved health fund.

Start a savings plan

Putting a savings plan in place can encourage good habits and help you feel in control of building what you might need to fund the lifestyle you want in the future.

Consider setting up a regular transfer into an investment that automatically takes place when you receive your pay – that is, before you spend any of your income.

This 'investment' could be a high interest savings account, for example, which allows you to take advantage of the power of compound interest.

Alternatively, if you have a mortgage, then this could mean putting additional money in an offset account, which then reduces the interest payable on your loan.

Don't put off budgeting

Budgeting doesn't need to be a complex set of spreadsheets. In 15 minutes you should be able to put down all your regular expenses like rent or mortgage payments, insurance and roughly what you spend on groceries and petrol each week against what you earn.

It may not be 100% accurate, but it'll give a good overall picture of how much is coming in and going out and how much you should be able to save.

Tackle your debt

If you have any personal debt, paying it and avoiding new debt could be an important resolution for the new financial year. Consolidating your debt and committing to paying it off within a set period, for example, can be one strategy.

If you have a mortgage, then increasing the size and frequency of your repayments can also be beneficial can effectively give you a risk-free return on your money by saving significantly on interest payments.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.