How to dodge investment traps that could cost you money during tax time

TAX time is just a week away. It’s important to avoid end-of-financial year traps. These three simple tips will ensure your investments maximise your bank balance.

ELVIS Presley famously sung about being caught in a trap, and he can’t walk out.

U2 famously sung about being stuck in a moment and now you can’t get out of it.

Well, investors, now is the moment to make sure you don’t get caught by end-of-financial year traps.

July is just a week away, and while it brings the complex but often rewarding tax time, it also slams the door shut on investment strategies.

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Property investors who are buying and selling have plenty to think about this week. Picture: Supplied

PROPERTY

Selling an investment property? Make sure you get the timing right because getting it wrong is painful. Capital gains tax can slug property investors tens of thousands of dollars, and many mistakenly think it applies at settlement date. It actually is based on the date the contract is signed, so keep your pen in your pocket this week.

Australia’s two million-plus property investors should also think about prepaying expenses such as interest, maintenance or insurance before June 30, which will bring forward their tax deductions.

But beware of this year’s first-time tax deduction traps. You can no longer claim any travel expenses related to your investment property, and if you’ve bought an established property in 2017-18 you can’t claim a deduction for depreciation of fixtures and fittings. Ouch.

SHARES

Timing also affects share investments. If you sell shares for a profit this week, you’ll pay capital gains tax quickly. If you hold off for one week, you get to delay the CGT bill until 2019-20. For a stock such as biotech giant CSL, whose shares have climbed from $12 to $200 in the past 15 years, delaying a selldown can be a big short-term saving.

However, you’re pretty safe if you’ve finally had a gutful of Telstra shares after another big sell-off last week. Telstra’s current share price below $2.80 is less than the $3.30 people first paid for it in 1997 — so the resulting capital loss could be used to offset investment gains elsewhere if you’ve had some.

Make sure you’re getting the best deal on term deposits and online savings accounts. Picture: Supplied

BANK ACCOUNTS

If you’re prepaying stuff for tax deductions or taking advantage of super incentives that offer handy tax rebates for injecting extra money before June 30, make sure your bank accounts have enough money in them, because if transfers bounce it will be too late to fix things.

Another big bank account trap should be checked now. Deposit rates are so low at the moment that every fraction of a percentage point counts, so make sure you’re getting the best deal on term deposits and online savings accounts.

Term deposits often roll over automatically, and if you try to withdraw your money after realising the current deal is a dud, you can be stung by penalty fees.

Knowing the potential traps is a big step in keeping more of your own money, so keep a suspicious mind about your finances, at least for the next week.

@keanemoney