Les McGuire ADFS(FP), Principal of Future Proof Financial, teaches us how to make tax a breeze

There are only two things in life that are guaranteed: paying tax and death (excuse me for the strong opening). Tax: now that’s a word we love to hate! Income tax is the most important source of revenue for government within the Australian taxation system. It’s what builds and services many of the things we use on an ongoing or ad-hoc basis: schools, hospitals, our health care system, roads, etc.

Tax rules change frequently, so do personal opportunities to take advantage of the changes. So, let’s investigate how some tax planning strategies can help us keep more of our hard-earned money.

Let’s first talk superannuation; nearly all Australians over the age of 18 have a superannuation fund. Superannuation is a great tax-effective strategy for retirement – but how can we use it?

We know that our employer needs to put a minimum of 9.5% into our super fund, but did you know that you can contribute up to $25,000 (including the employer’s contribution) into super? We can now contribute from both pre-tax (salary sacrifice contributions) or aftertax contributions and claim the tax deduction later. The ability to contribute both ways has been a beneficial change to employees.

Did you also know, if your spouse is earning less than $37,000 per annum and you put a $3,000 spouse contribution into their super fund, you can claim a $540 tax offset?

If your partner is older than you, there is an opportunity to contribute to their super through super splitting and taking advantage of the tax-free status earlier, boosting your retirement savings.

Now if we move the focus to invest outside of super. Do you have a home loan? If so, do you have equity in your home? Well, if you answered yes, consider this: for the right people, a debt recycling strategy can be extremely beneficial for many reasons. Imagine being in a position where investing in assets – managed funds or shares can be achieved using the equity in the home – and the income earned from these investments, can be used to reduce the non-deductible home loan debt faster. With each cycle, the home loan debt reduces faster, and the investment loan is increased, acquiring more investments where the loan is 100% tax-deductible. Debt-recycling is a great strategy if advised correctly to pay off your home faster and build wealth tax-effectively.

Tax-effective bonds have become an extremely valuable strategy for the right situation. The money within these bonds has internal taxation, and after ten years the money is 100% tax-free. There are many situations where these bonds can be used to ensure that your wealth strategy has the right diversity and balance to build wealth, save tax and become more financially secure faster.

As always keep smiling, if you need to ask any questions feel free to reach out and set yourself on a positive path for the future.

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