Planning for Life Media Alert End of Financial Year Edition

A number of key opportunities exist with the end of financial year looming. Below we have outlined some of these opportunities, what criteria you need to meet in order to qualify for this opportunity and what you need to do to take advantage of them.

1. Top Up Your Super with the Help of the Government

Applies to those who earn less than $61,919 from employment and have not yet made a personal contribution this financial year. If you earn less than $31,921pa a $1,000 personal contribution will attract a $1,000 government co-contribution. The amount of government co-contribution gradually reduces to zero when income reaches $61,919.

What to do? Contact your superannuation fund directly to organise the most efficient and convenient payment method (i.e. cheque, electronic funds transfer, BPay®). If your superannuation is with MLC and you are comfortable paying by cheque then please contact Planning for Life.

2. Contribute for your Spouse and Save Tax

Applies to those who have a spouse who earns less than $10,800pa. A $3,000 contribution made on the behalf of the spouse to super will result in the maximum $540 tax rebate. Please note that no rebate is received when the spouse’s income exceeds $13,800

What to do? Contact your superannuation fund directly to organise the most efficient and convenient payment method (i.e. cheque, electronic funds transfer, BPay®).

3. Boost Savings and Save Tax via Salary Sacrifice Applies to those who are eligible to receive a bonus. The benefit of this approach is that the tax on a salary sacrifice contribution is 15% versus the normal marginal income tax rate of up to 46.5%. Please note that contribution limits apply for Super Salary Sacrifice (i.e. maximum contribution is $25,000 for under 50’s and $50,000 for over 50’s) otherwise additional tax excess limits will be applied. Employer contributions are also included in the limits.

What to do? See your employer/payroll person requesting that any potential bonus be sacrificed to super. If in doubt contact your adviser.

4. Bringing Forward Tax Deductions

Applies to those who earn a higher income and have available cash and want to bring forward their deductions. Some areas where you can bring forward your deductions include, prepaying your interest on margin lending facilities, paying 12 months of income protection premiums or prepaying deductible interest expenses relating to investment properties (would need to see your relevant lender).

What to do? Contact your Adviser to action these opportunities.

5. Defer Asset Sales

Applies to those who are retiring in the new financial year and are looking at selling an asset. It is most advantageous to sell an asset in a year when your income is lower as the potential CGT implications are lower.

What to do? If you are able, defer the selling of an asset until when you are retired.

6. Contribute to Super to Offset Capital Gains Tax

Applies to those who have sold an asset where capital gains tax (CGT) will apply or those who earn less than 10% of their income and reportable fringe benefits from eligible employment. Please note that contribution limits apply for Super Salary Sacrifice (ie maximum contribution is $25,000 for under 50’s and $50,000 for over 50’s) otherwise additional tax excess limits will be applied.

What to do? Contact your Adviser to action these opportunities.

7. Defer Cashing Out Some of Your Super and Save Tax

Applies to those who are aged between 55 and 60 and want to cash out part of their super. For those aged between 55 and 60 there is no tax on cashing out some of your super, although you are taxed at 16.5% for amounts above the tax-free threshold of $160,000. To be able to access superannuation between 55 and 60 you need to satisfy a condition of release, which is to be fully retired and not intending to work again

What to do? If you can wait until you are 60 there is no tax on cashing out your superannuation.

A Final Word

Obviously you should not implement a strategy purely on a tax basis. If you are unsure whether some of these strategies apply to your particular financial situation please contact Planning for Life.