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Tax Deductions

Discussion in 'Accounting, Tax & Legal' started by Muzza, 7th May, 2008.

  1. Muzza

    Muzza Active Member

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    It looks like Im going to be on the border line of a tax bracket this year and would like to find 2-3k worth of deductions to make sure im under. I remember voluntary super contributions used to be tax deductible - does anyone know if this is still the case? If not does anyone know of any alternatives other than the Great Southern investments (which im looking into)?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You could pre-pay interest on any investment loans you have.
     
  3. Muzza

    Muzza Active Member

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    not really an option unfortunately as Im on a decent fixed rate and definitely not refinancing to get interest in advance. And regardless Im only looking at 2 -3k that I have available for this and my prepaid interest would be much more than that.

    Has anyone invested in the GSS Grape project?
     
  4. JustB

    JustB Well-Known Member

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    Is it really worth the capital outlay, or additional loan, to reduce your taxable income by $2-3k?

    The great southern grape vines are 80% tax deductible in year 1, with the remaining 20% deduction split over years 2 & 3, so you would need to purchase $3750 to get a $3k write-off. You also need an ABN, and would want to get the ball rolling very quickly to avoid potentially missing out on alotments. I was advised to get my application in over a month ago.....
     
  5. Muzza

    Muzza Active Member

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    yep definately worth it as im set to get just about all of the capital outlay back in a tax refund.

    Im guessing that superannuation contributions aren't tax deductible?
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Hi Muz,

    The story behind deductible contributions are a little more difficult than a straight yes or no.

    If your self-employed it's pretty straight forward, just make deductible contributions to your super and claim it as an expense.

    If your an employee, you can salary sacrifice contributions to reduce your taxable income.

    Just remember, any of the funds you put in are "locked" in super until you meet a condition of release.

    You can also look into Income Protection as these payments are also tax deductible.

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner.
     
  7. Muzza

    Muzza Active Member

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    Thanks Dan

    I havent salary sacrificed at all this year into my Super - I guess a lump sum into my super wouldnt be deductible then...
     
  8. AsxBroker

    AsxBroker Well-Known Member

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    Hi Muzza,

    If your self-employed you could probably wangle it (of course speak to your FPA registered financial planner).

    If your an employee, you may want to look at it from a different angle. If you have enough capital to live off for a few months, you could potentially tell your employer to salary sacrifice your salary (salary sacrificing is an oppotunity which your employer may or may not allow and up to certain limits). Obviously before you do this you'd also want to speak to an FPA registered financial planner.

    Cheers,

    Dan

    PS Don't forget to speak to an FPA registered Financial Planner before making superannuation or salary sacrificing decision.
     
  9. MrDarcy

    MrDarcy Well-Known Member

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    With the disclaimer:advice ratio hitting 3:2, it's getting hard to know which is the advice. (Sorry, had to get that off my chest)
     
  10. AsxBroker

    AsxBroker Well-Known Member

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    Hi Darcy,

    The previous post is general ideas and not advice.

    There are alot of disclaimers, as there is now the double tax disaster potential in superannuation (Financial Planning magazine, May 2008, Lucinda Beaman, "Beware the double tax disaster").

    If you put in too much, you could potentially be taxed at 93%. If you salary sacrifice more than $50,000 (if your under age 50), amounts over the $50,000 is taxed at contributions tax rate 15% plus an additional 31.5%. Resulting in the concessional contributions over $50,000 for someone under 50 being taxed at 46.5%.

    Any excessive concessional contributions are counted towards non-concessional cap which, if you contribute more than the non-concessional caps $150,000 or $450,000 if you want to use the 3 year rule, your funds will be taxed an additional 46.5%.

    Eg, if Homer Simpson is 36, he salary sacrifices $50,000, plus receiving 9% SGC from his employer (say $6,300 pa). Homer's concessional contributions have exceeded his concessional cap (by the $6,300). Homer receives some money from winning a lottery ticket which he bought from Apu's Qwik-E mart.
    Homer had already paid off his house so he put the money into his superannuation account, all $450,000 of his winnings.

    So, Homer's superannuation received a total of $506,300 ($50,000 + $6,300 + $450,000). The concessional contributions are taxed at 15%. The salary sacrificed contributions are taxed at 15% + 31.5% (being over the concessional contribution cap) + 46.5% by breaching the non-concessional contribution cap.

    Homer's SGC is taxed a massive 93% x $6,300 = $5,859
    This leaves Homer with $441 of his SGC :(

    Hence, 46.5% + 46.5% equals a whopping 93% tax!!!

    For this reason, I don't think anyone can be too careful!

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner who can give you specific advice tailored to your personal situation.

    PPS Yes, I know this is an extreme example and Homer doesn't work in Australia so he would probably not have a superannuation account but a 401k account, but this is an example...
     
  11. bella

    bella Well-Known Member

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    Can you prepay only part of your loan so the interest cost is around the amount you wish to pay? You might not have to fix and prepay the whole amount.

    Make sure if you are going to invest in something that the fundamentals are in order, don't just put money into something purely to save tax.

    Fido on tax schemes

    Maybe you could enrol in some work-related training or find some other work-related expenses (textbooks, clothing etc depending on your job).

    If that is the case, a charitable donation might help you over the finish line to the $2k deduction you need.
     
  12. Muzza

    Muzza Active Member

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    Thanks everyone, have definately got me thinking creatively - as for being self employed, I have an ABN but have only earnt approx $1,500 through it this year. The rest has been as an employee. Is there a limit i.e. 9 or 15% of gross income that can be put into super? If not then I may as well put the whole $1,500 into super and look for some small deductions elsewhere...