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With the end of financial year looming, it’s time for investors to consider their approach to taxation – From a wealth creation perspective the word finance involves strategies to efficiently leverage your investment portfolio, reduce assessable income and personal tax, and manage capital gains tax.

Active ImageWith the June financial year-end fast approaching, professional investment advisers have started working with their clients to address these three key areas.



The significant appreciation of many investment asset classes this year, especially Australian shares, has meant that the gearing ratio of the average portfolio has reduced. This provides an opportunity to purchase more shares, reduce the level of debt or maintain the gearing ratio.

With the prospect of higher interest rates in the coming year, many clients are considering fixing interest rates or reducing debt.

Income Tax

While a tax agent or accountant will assist you to claim all the relevant work-related deductions, only an experienced investment adviser will be able to employ share dividend, superannuation, and gearing strategies to potentially reduce your personal tax bill to a significant extent. For some investors, the power of fully franked dividends can mean the difference between paying tax or receiving a refund from the ATO.

The use of superannuation contributions to reduce assessable income is a straightforward strategy. However, the age-based deduction limits can offer investors the ability to increase their tax-deductible contributions by more than 250 percent between one year and the next. For example, someone turning 35 this year may be allowed to claim a maximum tax deduction of $40,560, whereas at age 34 the deduction was only $14,603. A person turning 50 this year may be able to claim $100,587 as a tax deduction.


Capital Gains

There are several strategies an adviser can employ to help an investor reduce their capital gains tax liability. This can be as simple as ensuring capital losses are offset against capital gains before the end of the financial year, or as involved as using a combination of deductible superannuation contributions to reduce assessable income and dividend streaming to ‘wipe out’ the tax bill for the superannuation fund.

The offsetting of capital losses and gains requires a diligent review of all realised and unrealised gains/losses well before June 30. Most investment advisers offer their clients a portfolio monitoring and reporting system which makes the review of gains and losses a straightforward process and also allows the adviser to project various ‘what if’ scenarios for the client.

More complex capital gains management strategies, especially for the self-employed, require careful planning. Your financial adviser can work with your accountant to ensure your end-of-year tax planning covers all bases, with the result being a very effective income and tax outcome for you.

* This article is for general advice only. We have not considered your relevant circumstances. Before acting on this advice you should contact your investment adviser.

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