If you are preparing your tax return and are alarmed to see you owe the tax office a large amount, it might be time to start seeing a financial adviser. Here are some of the ways that a financial adviser can improve your tax effectiveness.

Optimise your debt

Debt that is used for investment purposes, such as a mortgage over an investment property or a margin loan over a share portfolio, has tax deductible interest payment whilst debt on credit cards or a loan for the family home is not tax deductible. Structuring your debt so that you primarily have debt that is tax deductible can help to minimise your tax bill. This means it can be useful to hold extra funds in a mortgage offset account to minimise the interest payable on your mortgage, rather than in a savings account that earns taxable income.

Make a financial plan

Capital gains tax applies to investments that are held for less than 12 months. It can be useful to have a financial plan that structures which investments you will make and how long you will hold them to make sure that your cash flow and taxable income is at a level that suits you.

Optimising your superannuation contributions

Depending on your age and situation it can be sensible to increase the amount of tax-free contributions that you make into your superannuation, which can usually be withdrawn tax-free if you are over 60. This can be a very valuable way to minimise your tax if you are very close to retirement age but you are still working in some capacity.

Making tax effective investments

Many blue chip shares pay out 'franked' dividends where the company has already paid the necessary tax on the funds. This means you receive a tax credit equally to the company tax rate (which is usually 30 percent). This means it can often be more tax effective to have shares in your bank, rather than placing money inside the bank in a savings account. Financial advisers can help you to assess your ability to take on an investment risk and see how blue chip shares can fit into your overall investment strategy.

If you are looking to improve your tax position for the next tax year, it is a good idea to see a financial adviser. They can review your current position and goals and devise a strategy that suits you.  

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