Donations and other tax deductions

It's already June which means it's time to do your taxes for this financial year. Provided you do it immediately, it's not too late to save on tax by spending on tax deductible items. Here are some suggestions about donations and other tax deductions.

1) Borrow to invest

Usually this means buying an investment property, but if you don't want to spend $500 000, you can borrow $10 000 to buy a few shares and get similar tax deductions; you can also insure the shares to guarantee that you cannot lose money if they go down. Would you buy shares if they were guaranteed to win? The “insurance on your shares” may also be a tax-deductible expense.

2) Pre-pay investment expenses

For example, paying the interest on your share loan or property loan for one year in advance, NOW. Also take advantage of a 3-year fixed rate that may be lower than the standard variable rate. This will give you next year's tax deduction immediately, and a nice refund cheque in August 2006, not August 2007. You can pre-pay up to 13 months in advance. Check with your bank or financial institution for full details.

3) Pre-pay business expenses or work-related expenses

For example car or equipment leases, buying tools or equipment, superannuation contributions or pre-paying your income protection insurance. Get a whole year of peace of mind and an early refund cheque as well!

4) Donate to your favourite charity

Clean out your shed, your wardrobe and your wallet, and give away some of that cash or those things that you no longer need. This can make you feel all warm and fuzzy and also mean that the government may give you some cash back.

Donations are not just for the tax-conscious. They can also be good karma and help you to make more money.

US Financial Planner Suze Orman appeared on the Oprah Winfrey show and showed the difference between a "closed palm" and an "open palm". It seems pretty lame for a serious Financial Planner to show the difference between a closed fist and an open hand, but work with me here... Just visualise it.

Usually a fist has negative connotations. We speak of someone who may be "tight-fisted" and if you see someone making a fist, you generally get out of their way! When stressed or frightened, we often make the same gesture ourselves.

While a fist is good for defending yourself or clutching a weapon, it is not really that good for helping others. To provide assistance, you generally need to extend a hand, and to give gifts to others, you need an open palm.

When it comes time to RECEIVE, you also need an open palm and not a fist. When the world wants to give back to the givers, when karma comes back and when it is time for the sowers to reap, you need an open palm to ACCEPT things.

Give generously with an open palm and you will receive abundantly, give a little with a tight fist and you will only receive a little.

There are many worthy causes to give donations to, including The Salvation Army, The Smith Family, Guide Dogs for The Blind, Oxfam, the Blue Nurses, Meals on Wheels, and of course the many charities that sponsor underprivileged children, providing food and education, both in Australia and overseas. Find a cause that you are passionate about and give them a call today.

Advice given is of a general nature only and you should seek specific advice relevant to your situation before proceeding with any investment decision.

Jeremy Britton is an active Financial Planner who believes that investing is for everyone. He donates resources to any investment student who wants to learn.

3 comments | Add your own

Great article Jeremy. One thing that continual GST keeping has made me do is to keep my accounts very much up-to-date, so the end of financial year isn't such a headache ... I also find it a good idea at the beginning of June to do a mini appraisal of income and tax and see what tax deductible donations can be made. Apart from the many charities mentioned above, (all worthy), World Vision also has the "multiplying" gift at this time of year, where whatever you give is multiplied ten times in value.
Also, if you have been contributing to your own Superannuation as a soloist, now is the time to make any lump sums which can be claimed. (Check with the ATO website the amounts according to age.)
Although I am not against paying tax where it's due, it's a good time to ask myself, "do I want to pay more tax or donate (open fist) and make someone else's life more worthwhile?"
And, I believe that if we do have the dilemma of whether to pay more tax or donate, we should be glad we have made enough in the year to have to make those decisions. It means as soloists, we are doing ok. Karen from Springwood NSW
NIce one Karen, Thanks.
I also think that I am blessed to be given the opportunity to pay taxes... It means that I have made MORE than just a living, and there are many things that are provided free in this great country of ours. We have welfare, free hospital care, parks, gardens, beaches, free libraries, drinkable tap water and a million other things that we take for granted. Many countries that claim to be wealthier than ours do not have free education or hospital care.
There may be some people reading this who may not have enough money (or do not think that they have enough money) to give some away; that is fine. Give what you can give. Start from where you are.
Volunteer somewhere, such as driving the aged or infirm to do their shopping, read to the blind, teach English to immigrants, give the gift of Time, or Love, or Care if you cannot give money. It could also be a skill to add to your next resume or may lead to a business connection! :-)
I once helped a poor blind lady, and six months later someone in her family became one of my biggest clients. Helping a friend study a topic which I was experienced in, lead me to meet my wife. You never know your luck in a big city!
I love to teach others how to make more money than what they need to live on; as this often leads them to generousity, donating and making the world a better place. I guess that is "multiplying" also... :-)
Jeremy Britton DipFA SA(Fin) from Auth Rep Professional Investment Services AFSL 234951
Being able to donate due to successfully running a business is always a great feeling and ends up helping so many worthwhile Charities etc.
May I suggest aiming at spreading these donations throughout the next financial year rather than just giving at the end . This really helps these organisations - I used to work for one of them ! John Newhouse(Accounts While U Work) from TAHMOOR NSW

3 comments | Add your own

Add Your comments

Preview comment

Name

Website *

Town / city and country

Email (never sold, displayed or given away)

* This will link your name to your site. So please avoid self promotion elsewhere! We delete spam, disrespectful or off-topic comments.