This article was published in The West Australian on 6 June 2017: Six tips for end of tax year
By Daniel Viola, Financial Advisor, Blueprint Wealth
The end of the financial year is looming. Whilst it is always a good idea to plan ahead, and manage your tax affairs early in the financial year, here are 6 last minute tips that may help.
1. Contributions to Super – Salary Sacrifice or Concessional contributions if self-employed
If you have savings in the bank or surplus income, it may be worth considering a pre-tax contribution to superannuation.
- Individuals age 49 or over can contribute up to $35,000 this financial year
- Individuals under 49 can contribute $30,000 this financial year.
- This includes your own pre-tax contributions and those your employer makes.
Tax effective – Instead of paying tax on your income at your marginal tax rates, funds contributed to super in this way are taxed at 15% (or 30% if you earn over $300,000 per annum this financial year). Generally, if you earn more than $37,000 per annum, this can be a tax-effective strategy.
Employees can do this via ‘salary sacrifice’, which means that you and your employer agree to contribute some of your income to superannuation. Contributing some or all of your final pays or bonuses to super and utilising savings to meet your living expenses may assist in making last-minute pre-tax contributions. Self-employed people are able to make deductible contributions to Super, provided the contribution is received by the Super fund prior to the 30th of June.
As of the 1st of July 2017, the limit for pre-tax contributions will reduce to $25,000 for all individuals.
2. Bring-forward deductions
Bringing forward deductions is a great way to reduce your tax liability for the current financial year. Examples of this are pre-paying interest payments on investment loans or paying an annual premium payment for your Income Protection cover.
You could also consider disposing of investments that have experienced a capital loss and do not fit in your portfolio anymore. This loss can be used to offset any capital gains you have realised this financial year.
3. Defer taxable income
If possible, deferring income until after the 1st of July can be a useful strategy. This could involve delaying the sale of an asset or considering when fixed term investments will mature.
4. Spouse contributions
Individuals may be able to receive a tax offset by contributing to a spouse’s Super fund. This applies to individuals whose spouse earns less than $13,800. You may be eligible for a tax offset of up to $540 if a contribution of $3,000 is made to the spouse’s Super fund.
5. Government co-contributions
If an individual earns less than $51,021 and makes after-tax contributions, the government will match contributions. For individuals earning less than $36,021 the government will match contributions by 50c for every $1 contributed, up to a maximum of $500. The matching rate reduces as an individual’s income increases.
6. Consider how your investments are structured
When purchasing an investment, it is always a good idea to consider how the investment is owned. Common ownership structures include individual ownership and joint ownership, however structures such as Super, discretionary (family) trusts and companies are often ignored. It is important to consider the type of investment, the expected return, the expected size of the investment and also the end goal of the investment before deciding on a structure. How an investment is owned can have a big impact on how it is taxed both now and into the future.
If you have any questions or would like to speak with a Blueprint Wealth advisor, please contact us.
Daniel Viola is an authorised representative and credit representative of AMP Financial Planning. Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth, is an authorised representative and credit representative of AMP Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee (AFSL / ACL 232 706).
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.