Mr Taxman's Top Ten Tax Tips for 2009

Times are tough so every dollar saved counts. Last month we ran a few seminars giving over 100 tax tips! Here are my Top Ten Tax Tips for 2009. Remember that tax planning should be 365 days per year not just one month. These strategies are just as useful on 1 July.

10. Tax effective investments

These investments have copped alot of bad press in recent weeks thanks to Timbercorp & Great Southern debacles, but you shouldn't assume all are guilty by association. They generally have 100% tax deductibility (look for ATO Product Ruling). Unlike investments in shares or properties, if you invest say $50,000 in these types of investments you will get a tax deduction for $50,000. Will help with levelling out the tax on any capital gains made. Returns in this sector over the past decade have been better than other asset classes and would sit nicely in any diversified portfolio. Time is running out for these so act now.

9. Education Tax Refund

Don't miss out on this new tax rebate which gives a 50% refund on certain education expenses up to $750 expenditure for each primary school child and $1,500 for each secondary school student. For a list of expenses that are eligible go to here.

8. Realise capital losses

With the slump in the stock market this year, it is an opportunity to reduce the tax on gains made earlier in the year by selling a few non-performing shares. ATO was warned against "wash sales" where you sell shares & buy them back straight away. For those with self managed super funds (SMSFs) it is a great chance to transfer these shares into a lower taxed environment & potentially only pay 10% tax on future gains.

7. Keep your receipts

With the ATO increasing their audit activity this year yet again (this time due to record budget deficits) it is important that you keep your receipts. The ATO motto is no receipt = no deduction so you could be costing yourself $$$ by not keeping those dockets!

6. Prepay interest

Prepaying interest 12 months in advance before year end on your rental property or margin loan is an excellent strategy for those that will have a lower income next year due to factors such as maternity leave or redundancy.

5. Salary sacrifice/contribute into super

For those under 50 years of age you can contribute up to $50,000 per year into super & only pay 15% tax. This figure increases to $100,000 if you are over 50. Ultimately it is your money and you can build up your net wealth quicker instead of paying up to 46.5%. A great tax deduction for those in business. These figures are being halved for next financial year saving billions for the Government - just shows how good this strategy really is in saving tax.

4. Car log book

If you use your car for work purposes, then the best method to claim for it is the log book method. Purchase a log book from the newsagent, fill it out for 12 weeks & keep all costs associated with the running of your car including petrol, rego, insurances, servicing, repairs, lease payments, batteries, tyres, etc. You can start your log book now and roll it over into the next tax year. The hard work is worth it as deductions can be in the thousands and you only need to do a new log book every five years unless you change your job or car.

3. 30%/50% investment allowance

If your business needs to get some new equipment then take advantage of this great tax break of an extra 50% deduction for small business (or 30% for large businesses). Be careful that this is not a 50% cash rebate. You need to multiply the deduction by your marginal tax rate to get the cash flow benefit (eg for companies the tax rate is 30% so the cash flow benefit is merely 15%). Beware of potential FBT for cars purchased via companies and don't just spend or get into further debt just for the sake of a tax deduction. Also note that even if you order & pay for it this year, you only get the tax deduction in the financial year that you first get use of the new asset. Eg if delivery is on 1 July then tax deduction is in 2009/10 year not 2008/09.

2. Super co-contribution

If your (or your spouse's) income is under $30,342 and you contribute $1,000 post tax into your super fund the government will match it with a further $1,500. It amazes me how few people actually take advantage of this great benefit. Free money!

1. Action

Ok you have got some great tax strategies, now it is time to take action. I get frustrated when people say "oh yeah, I remember you telling me that but I just didn't get around to it" or "I forgot". Wrong answer. Use the Nike Principle and just do it! You will be surprised how many slackos there are that simply miss out on easy money despite how simple these strategies are.