It may be time to start thinking of ways to make your money work smarter and stop ripping yourself off. Here are three top tips for managing your finances over the next 12 months to maximise your 2015-16 tax return and potentially even boost your super at the same time.
1. Plan your cash flow
Every year there will be standard expenses you have to pay for by a certain time. If a recurring expense, such as insurance, can be paid monthly or later in the year at the same overall cost, this could free up some of your cash. While it is tempting to spend that extra cash, consider putting it in a high interest savings account or term deposit to boost your cash savings. If you have a mortgage with an offset account, top up the account to reduce the interest you need to pay on your mortgage.
Make sure you properly plan your cash flow and choose a savings account that gives you the flexibility you need around access to your funds for planned and unexpected expenses. By making your cash work harder for you, you will see your savings grow over the course of the new financial year.
2. Make extra contributions to your super fund
Your employer is required to make superannuation contributions on your behalf. However, you can top up your super fund by making additional contributions out of your pre-tax income by salary sacrificing and having an amount of your salary paid directly into your super fund instead of your bank account.
This can be advantageous as the income is taxed in your super fund at a rate of 15 per cent rather than your personal income tax rate.
For the 2015-16 financial year, the general concessional contributions cap for those 49 or older on 30 June is $35,000. For those younger, it is $30,000. If you exceed these caps, you might have to pay extra tax, so it’s worthwhile keeping an eye on when your superannuation fund receives your contributions to make sure you don’t exceed the cap on 30 June 2016.
Check with your employer on what you need to do to salary sacrifice super contributions.
3. Prepay tax-deductible expenses just before year-end
You can generally claim a tax deduction for expenses you incur that relate to earning income that gets taxed. Consider whether any of your expenses can be prepaid sooner than 30 June so that you can claim a tax deduction for them before the end of financial year. Expenses you might be able to prepay include:
- Gifts and donations.
- Self-education expenses for eligible courses.
- Subscriptions relevant to your trade or professional field.
- Income protection insurance.
- Union fees and subscriptions to associations.
- Other work-related expenses such as tools and equipment.
If you borrowed to invest in an investment property, shares or a managed fund, you may be eligible to claim a tax deduction for expenses such as insurance or interest prepaid before the end of the year. Enquire with your financial institution to confirm the interest you can prepay.
Investment property owners needing to do repairs or renovations, may wish to think about locking these in before the end of financial year. For repairs and maintenance costs incurred before year-end, a tax deduction is available for those costs in your 2015-16 tax return.
If in doubt, speak to your tax agent, accountant or check out the ATO website for guidance.
With a little bit of planning and focus, you can make your money work harder for you. If you only make one change this financial year, stop being a shonky saver and stop ripping yourself off by leveraging every dollar you save.