‘Failing to plan is planning to fail’ – Benjamin Franklin
One of the many great joys of living and working in Singapore is the low tax rates that we all enjoy. However, it’s that time of the year again, ‘end of financial year’, and many of us who have investment properties in Australia and other taxable Australian assets need to be mindful of the impact of Australian taxes and plan accordingly.
The tax rates for residents and non-residents are highlighted below:
Figure 1 – Source: www.ato.gov.au
Please note that this does not factor in the Medicare Levy or Temporary Budget Repair Levy.
As non-residents, we pay 32.5% from the first dollar of net income that we generate in Australia, which for many of us will be rental income on our investment properties.
As we approach the end of this financial year (June 30, 2016), it’s an excellent time to explore some of the strategies you can implement to reduce your tax liability in Australia.
1. Prepay interest on your investment property loan
You can prepay up to 13 months of interest that would normally be incurred in one upfront payment. The interest rate that applies is fixed at an annual discounted rate and most importantly, it can be deducted from your taxable income in the year that it’s paid. This can be particularly valuable if you expect next year’s income to be lower than the current year.
2. Prepay property expenses
You can also look to prepay other property expenses for the following financial year, such as insurances, repairs, maintenance and even pest control. This can allow you to increase your deductions in this financial year.
3. Contribute to your superannuation fund
Even as expats, in most cases you can still make concessional (tax-deductible) contributions into your superannuation fund. The current limits are $30,000 for those below 49, and $35,000 for those above. This can be an excellent strategy to reduce your tax liability while boosting your retirement savings.
4. Ensure you have a depreciation report for your investment property
If you have an investment property that is relatively new, ensure that you have your quantity surveyor’s report to claim your legitimate tax deductions. This includes the building itself as well as the fixtures and fittings that can be deducted over their individual lifespans.
5. Prepay income protection insurance premiums
If you still have income protection policies through Australian providers and have taxable income in Australia, consider prepaying your income protection premiums. This will allow you to bring forward your tax deduction.
These are just five of the many options you can consider to ensure that you’re not overpaying on your tax bill. Start planning early and ensure that you’re taking the right steps at the end of this financial year.
To Your Financial Success!
Jarrad Brown is the trusted fee-based financial advice provider for Australian expatriates living in Singapore and throughout Asia-Pacific.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.