Tax Time: What You Need To Know Before June 30th
Get the bubbly ready because we’re about to celebrate the end of the financial year!
Okay, perhaps it’s not that much fun.
The Countdown Is On
Read this tax-time reminder now because tax is, by far and away, the most expensive bill almost all Aussie investors have to pay each year.
If you pay 30% tax this year it means you worked three months of the year just to pay the tax man!
So I’m guessing you can see why franking credits, negative gearing, long-term investing and the reno on a “home” (that was lived in for just over a year) are some of the most common strategies used by Aussie investors.
The Good News
The good news is we still have 18 days to go until the end of the 2017/2018 tax year That’s 18 days to get our tax affairs in order.
And, chances are, if you call your accountant now they’ll have more time to answer your tax questions than they will after June 30th — when 200+ of their clients all want their tax done in the first 3 months!
I’ll shamelessly plug my new members-only finance and investing service, Rask Invest, and remind you to ask your accountant today if a Rask Invest subscription (which provides access to all of my research) is tax deductible. I’m pretty confident it will be for most active investors, but I’m not a registered tax agent.
Tax: So What’s Changed?
I got the following information direct from the ATO website — I sifted through it to find the tax-time rulings that are most important to investors like me.
1. No depreciation on second-hand goods in rentals
This rule has been in force since 1 July 2017 and applies to second-hand equipment bought for rental properties. It was designed to stop people claiming tax benefits on the stuff they used in their own home (and then transferred to the rental property) or acquired as part of the property.
2. Super Saver Scheme now in action
From 1 July 2018 first home buyers can apply to release their voluntary Super contributions to buy their first property. The per-person contributions were capped at $15,000 per year and $30,000 in total (plus investment gains) and require a person to live in the property for 6 out of the 12 months following the purchase.
3. Big one: Before tax contributions can be carried forward
From 1 July 2018, unused “before tax” Super contributions can be carried forward on a rolling five-year basis, provided your balance is less than $500k. As a reminder, before tax or “concessional” contributions include things like the super guarantee, salary sacrifice, personal contributions with a tax deduction, etc.. Before tax contributions are capped at $25,000.
The coming financial year (2018/2019) is the first year for this new ruling. What it means is, unused amounts of the before-tax contribution limit ($25k per year) can be carried forward into the tax year that starts 1 July 2019. For example, if someone who meets the eligibility rules contributes $10k to Super in the coming year they will have $15k of ‘unused’ before tax contributions which can be taken up in the following year.
4. Tax deductions for personal Super contributions
The current financial year was/is the first year when most people could/can make a personal contribution to Super and claim a tax deduction. Previously, it was reserved for the self-employed. This ruling effectively did away with salary sacrifice for some Aussies.
5. Downsizing in full effect
When the Government announced the Super Saver scheme it also announced the downsizer scheme, which was designed to help baby boomers contribute cash from the sale of their home into Super. From 1 July 2018, eligible Aussies 65 or older can contribute up to $300,000 into Super and it will not be counted towards the contribution caps.
According to the ATO website, this strategy could have longer-term tax effects due to the transfer cap of $1.6m and may impact the aged pension. So, talk to your accountant or adviser long before you decide to do anything.
As you can see, it’s going to be a busy time of year for your accountant, so call or email them now to get ahead of the changes.
And while you’re at it don’t forget to ask them if a Rask Invest membership is tax deductible!
Cheers to our financial futures!
Founder and Lead Advisor of Rask Invest
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I’ll admit it, tax can be a pain. That’s one of the reasons I choose to invest long-term like Warren Buffett. In 2018, Buffett’s wealth was estimated to be $US84 billion. I recently wrote an Ebook documenting Buffett’s investing steps and how they can apply to Australian-based investors.
I’m giving away the ebook for free today, “What Warren Buffett’s Investing Checklist Can Teach Aussie Investors“. Download it for free when you join our Investor Club Newsletter!
This article contains general information only. Consult with a registered tax agent before acting on the information presented here. See our disclaimer below.