Before you know it, the end of June will be rolling around and we'll all be thinking about our tax returns. So it's no surprise that the Australian Taxation Office (ATO) is reminding people to check carefully before diving into last-minute investment schemes designed to reduce tax liability.
Many investment schemes are promoted with the idea that they will reduce tax liability. While there are investment strategies that do that -- being able to claim the interest payments on a loan for an investment property is one obvious example -- the rules can be complex. If you're considering that kind of commitment, make sure you get advice on its legality from someone who isn't trying to sell it to you, as commissioner Michael D'Ascenzo suggests:
Doing your research and seeking independent financial advice from someone not involved with the arrangement before investing is your best protection against promoters of tax avoidance schemes.
As dull as it sounds, an investment whose primary purpose is to reduce your tax bill is not likely to be as effective in the long run as one which can potentially generate a real return. The ATO has a guide to tax-effective investing which covers the basic rules, but specialist advice is going to be a necessity if you do pursue this kind of idea.