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Smart Ways to Reduce Burden |
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Property:
Expenses such as borrowing expenses, depreciation and capital works expenditure may be deductible over several years. Costs of buying or selling a rental property are not deductible but may be included in the cost base of the property for capital gains tax (CGT) purposes.
Shares:
Selling shares may result in CGT but the liability can be minimised by selling the shares after year end or by selling other assets for which there will be a capital loss. If the shares are sold after being held 12 months, the taxable capital gain may be halved.
- Expenses incurred in gained income from shares, such as fees paid to financial advisers, interest on loans and travel expenses incurred in servicing the investment portfolio, may be deductible.
- The costs of buying shares, such as brokerage fees, are included in the cost base of the shares for CGT purposes (unless you are a share trader).
Other income:
If possible, defer income until after June 30. As well as deferring the tax liability by putting off income, thanks to changes announced to tax thresholds in the budget the income tax rates may mean a lower tax rate, depending on your income.
- Expenses incurred in getting income, such as account fees on bank accounts that earn interest, may be deductible.
Superannuation:
For most taxpayers, up to $1 million can be transferred to their superannuation funds before June 30 2007. After July 1 contributions made out of post tax income or assets are limited to $150,000 a year or $450,000 over three years. Contributions made out of pre tax income will be limited to $50,000 a person a year.
Tax related expenses:
You can claim deductions for fees paid to registered tax agents or for advice on tax matters.
FINDING THE RIGHT SCHEME
Comparison of Tax Minimisation Schemes
| Scheme |
Min Investment |
Advantages |
Disadvantages |
Long Term |
| Negatively geared property |
- Metro $300,000
- Regional $100,000
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- Continues for many years
- Can claim depreciation as well as interest and tax
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- House prices can stay down for years
- Bad tenants can be a problem
- Can take months to set up
- May be hard to get out of
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- House prices remain sluggish in all but WA and Qld
- Distinct two-tier market with quality end doing well everywhere
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| Margin account |
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- Continues for many years
- Interest payments deductible
- Dividend payments may be franked (tax free)
- Possible good capital gain
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- No upfront deduction
- Investor must contribute 30% of portfolio value
- Shares can fall quickly in value
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- Depends on your view of the sharemarket. So far this year it's doing well but that's so far
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| Capital protected margin account with pre-paid interest |
- Varies, no point for less than $5,000
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- Can be done immediately
- Shares disposed of just as easily
- Upfront deduction of any size can be arranged
- If shares fall in value, investor can walk away with their initial investment intact
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- For taxpayers in the top brackets this does little more than defer tax so it all has to be done again next year
- High cost of interest plus capital protection
- Shares can fall quickly in value
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- Depends on the sharemarket and the market has to do particularly well to offset the cost of this scheme
- Requires good performance to pay the costs
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| Forestry & agricultural schemes |
- Small, a few thousand dollars
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- Deduction can be much larger than the amount paid depending on the scheme
- Upfront deduction
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- Investments can have varied results
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- Non-forestry schemes will lose tax advantages after the end of next financial year
- Drought is affecting some agribusiness projects; forestry not so affected
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| Superannuation |
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- Contributions tax just 15%
- Can be done at any time
- No tax on payouts
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- Mostly locked away until you are 60
- Limited investment flexibility unless in SMSF
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- Rules on maximum contributions will change after June 30 for the better for most
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| Warrants |
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+ 61 8 8333 1944
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