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Tax tips for the new financial year

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Just as many people make New Year’s resolutions, it might also be a good idea to look to make changes in the new financial year and become as tax effective as you can be. 

The new financial year is a great time to reassess your financial position and look for any tax benefits you qualify for. 

One of the first things you should do is review deductible and nondeductible debt. Having high levels of non-deductible debt – such as a home loan mortgage, a car loan or a credit card – is a disadvantage as there is no tax deduction that can be claimed on the interest payments for these kinds of loan facilities. Paying down this kind of debt should be a priority and any spare funds you have (such as a tax refund) should be used to do this as quickly as possible.

Deductible debt on the other hand – such as the interest on a loan over an investment property or a share market portfolio – can be claimed as a tax deduction and should, generally speaking, be paid off only after your non-deductible debt has been eliminated.

If you're looking to maximise cash flow you might should consider having an interest-only loan over all your income generating investments and contribute the cash your save to making principal repayments on your non-deductible debts, such as your home loan.

However, care must be taken when restructuring loans minimise tax. In addition, in the current lending environment, make sure you pay attention to the rate of interest being charged for interest only investment loans. 

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