Opinion
The single move that will cut $540 from your tax bill
Nicole Pedersen-McKinnon
Money contributorLast week’s budget contained many positives for our bottom lines but made one thing clear: this financial year is staying a tougher, higher taxing one.
So it’s lucky that firstly, there are only six weeks left of it and secondly, there are several last-minute strategies you can use to save.
For example, did you know doing one single thing now will snare you $540 tax back after July 1? That’s a tax rebate, so it is lopped straight off the top of your bill. This, plus a couple of other easy techniques will secure you large deductions.
Let’s start with that $540 tax rebate.
Probably the most effective way to cut your tax at the 11th hour is to make a contribution to a spouse’s super. One spouse needs to contribute $3000 and to be eligible for the full rebate, the receiving spouse needs to earn below $37,000. But some is paid on incomes up to $40,000.
Here, the lower-earning spouse doesn’t need to be actually earning, so the truly beautiful thing about this is that it’s a whole-of-family way to stop carer breaks hurting someone’s retirement.
I know finding extra money today may be a big stretch. But if you can redeploy any, the financial advantage could work out well worth it.
As the women’s budget statement reiterated: “The superannuation gap … currently sees women retire with around 25 per cent less super than men.” (From July 2025, super contributions being made on top of government paid parental leave – which is also going up to 26 weeks – will be a small step to fix this.)
Getting back to the spouse contribution solution, you need to pay the $3000 after tax as a non-concessional contribution. Just contact your superannuation fund for how.
My final savings strategy also involves super. While not a tax hack, it’s an opportunity that disappears on July 1 … if you yourself make a $1000 after-tax contribution to super, you could receive that free $500 into your fund.
Called the co-contribution, you do have to be earning in some capacity to be eligible for this one. You qualify for the full amount this tax year if your income is less than $43,445 and some up to $58,445 (next financial year, the respective thresholds are $45,400 and $60,400).
You should aim to take up these big super perks each year and every year – doing so would put you a bunch closer to a comfy retirement.
So what are the big possible deductions I spoke of? Pre-paying particular expenses will bring them forward into this pre-tax cut year – that’s only by a few weeks now don’t forget. So buy anything that you or your business can deduct.
But more effective still, consider an advance interest payment on any investment properties or loans for shares … any debt that earns you income and so qualifies for deductions.
That brings us to probably the major one: income protection insurance.
Making some clever choices before tax time can help bring down your bill.Credit: Getty
If you don’t have this, you need it. Forget your house; your income is your most valuable asset. What would you do if sickness or injury meant you weren’t able to earn it?
Getting a year ahead (or even more if you can afford it) on your premiums also neatly brings down for this expensive year, your assessable income by that same amount – so getting your safety sorted today carries double the benefit.
Yes, I know finding extra money today may be a big stretch. But if you can redeploy any, the financial advantage could work out well worth it.
Please don’t forget charity either. Provided one is registered as such, any donations are fully tax-deductible and so many charities, especially in housing, feeding and clothing, could sure use your help.
And remember that from July 1, you will have a tax cut … that you could mobilise to make and save even more money.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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