Taxing options for investors

With the end of the financial year fast approaching there are taxing decisions to be made by investors. Whether its an investment-property loan or term deposit it is important to consider the tax implications of your investments.

An astute investor plans ahead and for tax planning purposes that means arranging things now for the best outcome next financial year by implementing the old tax planning rule – put income back, bring deductions forward. There are many banking products designed to maximise tax-effective returns involving either payment of interest in advance or deferring interest payments.

Paying interest in advance can be an effective tool in bringing yearly, six monthly, quarterly or monthly interest payments forward into an earlier financial year when better value for interest deductions can be gained.

ANZ, the Commonwealth, NAB, Westpac and Suncorp Metway are among the banks to offer this ability on request.

Deferred interest payments work on a similar principle but in reverse for those earning interest on their savings investments. For example, invest money in a term deposit in June 2001 for a period of 13 months with interest payable at maturity you will receive an interest payment in July 2002. You will not have to declare this income until the end of that financial year, in your July 2003 tax return.

Most institutions that offer term deposits will defer interest payments in this way on request.

Investors should consult their accountant or financial planner to ensure any tax strategies pursued suit their circumstances.