With the end of the financial year now only 10 weeks away it's time to start thinking about tax planning for the year.
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Some people were badly affected by COVID events and definitely won't need extra tax deductions.
Others have benefited greatly from the unexpected circumstances.
Some businesses may have initially qualified for JobKeeper payments, which are taxable income, but later had a big turnaround.
There are always people who have sold shares, property or funds and have a capital gains tax problem.
The most popular tax planning strategies involve superannuation and prepayment of expenses such as interest on investment loans.
New investment loan approvals take many weeks due to the responsible lending laws.
Asset values are rising, especially property and shares, and managed funds investing in them.
With interest rates low, near two per cent in many cases, borrowing is cheap.
If the interest is tax deductible the net cost is even less.
Property, shares and managed funds can be bought with borrowed money, and interest on investment loans is tax deductible.
This is an attractive strategy now for people aiming to build wealth.
Pre-paying interest for next year in June will also save tax in this financial year.
Those considering geared investment strategies need a reliable income to meet loan payments in all circumstances. Surplus income is desirable, and a long time frame to allow for fluctuations and irregular growth in values.
Loans secured by a home or other property are cheapest and won't require margin payments.
Margin loans are more expensive but can still be a sound option.
They may require investors to make extra payments if values fall sharply but allow small investments and avoid the need to mortgage a home.
A property bought with a loan costing 2.5 per cent could generate 3 per cent net rental income and grow 5 per cent per annum.
Large company shares pay around 4 per cent dividends and should grow 5 per cent per annum.
However, individual share performances can vary widely so a good spread is best to reduce risk.
Managed share funds provide exposure to many companies. Professional managers increase the chances of a profitable outcome.
Diversified funds can provide a prudent approach. They vary less but have averaged over 7 per cent per annum for the last 10 years.
Geared investments should be carefully planned, perhaps with help from an accountant or financial planner.
Gearing accelerates returns by using borrowings to earn growth on appreciating assets.
There can be problems if investments lose value, but if well chosen returns can be high.