Keep As Much As You Can By Effective Tax Planning
As concerns over the global economy continue to grow, it is essential that all individuals and businesses are well prepared for financially-testing times. Sound business and financial planning are always important, but especially so in an economic downturn. The financial turmoil may have you wondering whether you will have enough money to send your children to university, to pay for your own retirement, or to meet your other financial goals. Effective tax planning is a year-round, lifelong activity, and though constantly changing tax law can make planning a challenge, making it a priority will pay off with lower taxes. We are committed to working with you to find the tax strategies best suited to your individual circumstances. If you have questions about anything in this newsletter or about your tax-cutting options, please call. And if you have friends or associates who might be interested in end of year tax planning information, feel free to share this newsletter with them.
Caution With Capital Losses
A typical end of year tax planning strategy is to dispose of investment with unrealised capital losses and offset these losses against capital gains. This is not always as simple as it first appears. The ATO has released a warning to investors against the use of ‘wash sales’. Wash sales occur in two forms. Firstly, an investor sells and repurchases the same or substantially the same asset within a short period. Another approach is for an investor to sell the asset to a related party or entity controlled by them, or an associate, in order to realise the loss on the asset. A common feature of both strategies is that a tax loss has been realised, but the ownership of the underlying asset is effectively unchanged. The ATO has warned that it will apply anti-avoidance provisions to wash sales where the purpose of the transaction was solely to obtain a tax benefit.