Another great tax tactic to have up your sleeve to help reduce your personal income tax, and ultimately build more wealth for your retirement is increasing your superannuation contributions. The summary below sets out the broad categories of superannuation contributions that may enable you to reduce your overall taxation liabilities:
• Concessional Contributions (Pre Tax). If you are eligible and have the financial means to do so, you can contribute up to $27,500 per annum, inclusive of employer contributions.
• Salary Sacrifice. With the agreement of your employer, you may be able to put some of your pre-tax salary towards your superannuation account.
• Non-Concessional Contributions (After-Tax). You may also be able to make contributions to your superannuation using your take-home pay. The earnings on your investment will be taxed at a lower rate and even tax free when you reach retirement.
• Co-Contribution. If you have a low income and make after-tax contributions to your superannuation, the government may match your contribution (up to a limit) and provide you with a tax benefit.
Managing your capital gains and losses
Another useful strategy is to manage your assets and it starts with one simple concept – planning ahead.
What is your overall investment strategy? Are you planning on selling an asset? You need to be careful that the capital gains generated from the sale of a large investment doesn’t generate big capital gains as this could increase your tax threshold. You may want to consider the following options to minimise tax liabilities and avoid losing your capital gains.
- If you forecast that your earnings are higher this financial year, you may want to delay the sale of property to a year when your earning capacity is lower, so that the capital gains are offset against your annual income. Remember, the sale date is the date of exchange on a sale, not the date of settlement.
- Delay the sale of a new property for 12 months or more to gain 50% capital gains tax discount. If you buy and develop a property under 12 months and wish to sell within that time frame, then your full capital gain will be tax liable.
To better understand how to lower your tax liabilities and to plan your future investments wisely, then start a conversation with our team today by emailing us here.
