With the new financial year upon us it’s the best time to start thinking about your finances to help maximise any tax deductions you may be eligible for. Some of the below strategies are almost cost free and can save you money each year.

Its also a  great time to review your budget and any financial goals you may have set at the start of the new year to help get you back on track.

Make your insurance more cost-effective

There are ways of setting up personal insurance so it’s more affordable and tax-effective. The most common strategy is to purchase life and total and permanent disability (TPD) insurance through your super fund.

Insurance premiums can be paid from your existing account balance, your employer contributions (such as superannuation guarantee) or you can salary sacrifice an amount to super, giving you a cashflow advantage.

In some cases, you may be eligible for a discount if you pay your premiums annually rather than monthly and holding all your personal insurances in the one policy can reduce fees. Savings can also be made by consolidating the insurances held by yourself and family members into one policy

Consolidate your super

Soon all your annual statements will be coming in from your superannuation companies. If you are one of the many Australians who have multiple accounts you may be paying excess money in administration fees. A recent blog post from Income Solutions shows that a client with three funds with a balance of $10,000 in each can benefit as much as $680 per annum by combining the three accounts into one.

Use your debt to grow wealth

While most of us have some degree of debt, we tend to see this as a burden. But by harnessing the power of ‘good’ debt, such as borrowed capital used to invest in assets like shares, you can grow wealth and generate an income. What’s more, unlike your home loan, the interest on an investment loan is generally tax deductible.

One example of this is drawing on the equity in your home to establish an investment loan, and investing this money in shares. By doing this you’re building an income producing asset apart from your home and you can use the income from this additional investment (and any tax advantages) to reduce the outstanding mortgage. For more information on how this may assist you come along to one of our free information sessions Conquer your Debt which explains ways to minimise your mortgage quickly and how to build wealth through borrowing.

Reduce your mortgage

One way to do this is by having your salary paid into a 100% offset account linked to your mortgage. You can still access the money for everyday transactions. Any money you put in the offset account is deducted from your loan balance before interest is calculated, meaning you save interest and pay off the home loan sooner. A recent article on our blog “ 100% offset: Reduce your home loan interest” can help explain in depth how these accounts work.

Make the most of your super

By putting more money into your super, you can take advantage of tax benefits that may not be available to you otherwise.

Undoubtedly you would have heard the term salary sacrifice used a number of times. But it’s not about sacrifice, rather about investing a portion of your pre-tax salary into your super fund.

The beauty of this strategy is you pay less tax because your super contribution is taxed at a maximum rate of 15%. This could be much better than your marginal rate, which may be up to 46.5%( This figure includes a Medicare levy of 1.5%). You can even use this strategy for any bonuses you receive.

If taken as cash, your bonus will be taxed at your marginal rate. Depending on your circumstances, a salary sacrifice strategy could reduce the tax rate payable on your bonus by up to 31.5%.

Consider the caps

Before you decide to invest more in super, you need to be aware that caps apply to different contribution types and penalties may be payable if you exceed the relevant cap. You also need to consider that super contributions generally can’t be accessed until you retire. So if you are saving for something else, you’ll need to consider other options.

Before you go ahead with any of these strategies its best to speak to a financial planner to go through the figures for your specific situation. Request a free consultation with one of our planners today or alternatively come along to our information evening to learn more about these strategies

By Income Solutions Financial Planners and MLC

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.