Simple strategy could reduce a $23,000 tax bill

THIS year I earned $92,000 and paid $23,000 in tax.

Is there anything I can do to cut my tax?

There is not much you can do with salary income, but in the current financial year you could make a deductible superannuation contribution of the difference between the limit of $25,000 and the employer contribution. If we assume the employer contribution is $9000, you could make a concessional contribution of $16,000. This would incur 15 per cent in contributions tax but it would cut your taxable income to $76,000 and reduce your tax from $23,000 to $17,000. I REALLY appreciate your columns but wonder if a recent answer to the carer of a 76-year-old mum, concerning the unit she owns, might be incomplete.

My understanding is that a parent being cared for by a family member may be able to arrange to transfer a share of their asset (a unit in this case) to their carer in exchange for ongoing care, thus saving the government the greater cost of providing care. This of course may not apply if the carer is a “protected person”. We are interested in the subject, as we are in our late 70s, own our home, and are thinking about our own future.

Rachel Lane of Aged Care Gurus says that you appear to be referring to granny flat rights, which enable people to transfer their property in exchange for a right to live in that, or another, property. These rights don’t require someone to be provided with care – although this is a common family situation. An important aspect of establishing a granny flat arrangement is understanding that there is a five-year look back. This means that if the person who has transferred the property moves into care within five years of the transfer, the transaction can be considered a deprived asset or gift for Centrelink and aged care purposes.

The Q and A you mention was dealing with a situation where care had already been entered into, or was imminent – hence such a strategy would not be appropriate.

If you are considering going down this road I can’t stress enough the importance of specialist legal and financial advice. I READ your reply to a recent question regarding calculating CGT for a property that was rented then became principal residence. Our case is same. It was rented from 1990-1997 then lived in until now. Your reply advised that any unclaimed expenses, including during residency, can be added to the cost base before sale. If this is so, I should keep documents for rates, insurance, cleaning etc. since we moved in 1997? Even for use-based items like light globes and water? Are scanned electronic copies acceptable?

Julia Hartman of Bantacs confirms that scanned receipts are acceptable – unfortunately you are not entitled to increase the cost base by these holding costs because you purchased the property before August 20, 1991. Only properties acquired after that date qualify.