It’s that time of the year again. It’s the end of one financial year and the start of the next, which is the perfect time for a tax review. Tax can be one of the biggest costs to investors so it’s important you're aware of the tax you’re paying on all your investments. It’s also the perfect time to consider alternative strategies as a way to reduce your tax burden and lower your effective tax rates going forward.
Below are some considerations this tax time to help you improve your tax savings and make the most of your investments. After all, it’s your hard-earned money, so make sure you look after it.
1. Have you reviewed your private health cover?
Surprisingly, this can impact your tax bill. Did you know, that having a sufficient level of private hospital cover means you don't need to pay the Medicare Levy Surcharge, which can be up to 1.5% of your income? If you earn more than $97,000 as an individual or $193,000 as a couple or family during this new financial year, you may have to pay the Medicare Levy Surcharge as well.* If you hold the appropriate level of private hospital cover for the full tax year, it means you won’t pay the Medicare Levy Surcharge and it may work out to be more cost-effective for you overall.
2. Have you considered all of your income sources and how much income these sources are producing?
It's very important to calculate just how much income you’re likely to earn from all your income sources across the financial year and calculating all the income you derived in the financial year just gone may be a good place to start. One thing to also consider, especially now that the new Stage 3 tax cuts are set in stone, is whether your level of income for the new financial year will take you up into the next tax bracket and result in an additional tax bill. It's worth considering tax-paid investment structures that don't need to be declared as part of your personal, annual tax return each year, that can help minimise the impact of tax bracket creep in this new financial year and the next one.
3. Have you been maximising your superannuation contributions?
At this time of year, you could start early and take advantage of the government’s tax incentives to save through super. Making additional deductible contributions to super can help reduce your tax bill. Superannuation has long been considered the most tax-effective form of investing and by making additional salary sacrificed or personal concessional contributions you will be doing your tax bill a favour whilst also boosting your super balance. Win win! Since you generally won't access your super before preservation age, you have the added benefit of the miracle of compounding returns which could result in a significantly positive difference to your super balance by the time you reach retirement - the single most powerful tool you can take advantage of with your super.
4. Have you considered tax paid investment structures such as investment bonds?
Investment bonds are a tax-paid structure that complement your super. They offer powerful tax advantages - especially for high income earners. Investment earnings do not need to be declared in your annual tax return and you can set up a regular savings plan to help you reach your savings goals sooner. All earnings in an investment bond are taxed at a maximum rate of 30% however the effective tax rate can be significantly lower depending on the investment options you choose. The compounding effect of this tax saving over time can be significant.
Investment bonds – lower tax leads to higher after-tax returns
An investment bond is a highly tax-effective investment solution designed to meet your investment objectives and covers a wide range of investment needs and life stages such as:
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Wealth creation
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Tax planning
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Estate planning
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Wealth transfers
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Retirement savings
Innovative approach to tax management
Generation Life has been at the forefront in innovating the tax-effective investing landscape through a new generation of investment bonds, across generations now for over 20 years.
Our market-leading tax smart approach takes investing in an investment bond one step further and allows us to deliver enhanced after-tax return outcomes for our clients – with no additional investment risk or cost.
