Episode Details

Over the last few weeks we have been working closely with our advisory clients assisting them with end of financial year tactics. I provide a list below of some of the tactics that we have been implementing. It is worth taking a couple of minutes now to see if you can benefit from any of these.

If you are under 65 and generate some taxable income (i.e. working), you can make up to $25,000 of tax-deductible superannuation contributions per year (if you are aged between 65 and 74 you must meet the work test). This is called the ‘concessional contributions cap’ (“CCC”).

Included in the CCC is any contributions that your employer has made on your behalf (i.e. the mandated Superannuation Guarantee Charge of 9.5% p.a.). If you have any insurance policies which are owned inside super and you pay for the premiums personally, then this amount is also included in the CCC (if in doubt, speak to your insurance adviser).

This year (2017/18) is the first year that both employees and self-employed persons can make a personal super contribution from their personal savings and then claim a tax deduction for this contribution in their personal tax return. If you do this, you will need to complete a ‘notice of intent’ and give it to your super fund.

For example, if you expect employer will contribute say $12,000 into super for the year ending 30 June 2018, then you can make an additional contribution (from personal savings) of $13,000 and claim a tax deduction for it. If your income is less than $200,000, then this $13,000 contribution will only attract tax at the rate of 15% within super (thereby possibly saving you 32% or over $4,000 in tax – which is the difference between the super fund tax rate and your marginal tax rate).

If you are under the age of 65 (or between 65 and 74 and meet the work test), it might be worth contributing some of your savings (in your personal name) into super. This is called a Non-Concessional Contribution (NCC). The NCC cap for people with less than $1.4 million of super is $100,000 per year or $300,000 in one lump (bring forward the next three years cap).

Super is obviously a very tax-effective environment (nil tax whilst in pension phase). Therefore, if you are approaching retirement, often it makes sense to shift wealth into super. Obviously, this depends on the value of other investment assets that you may have – you probably shouldn’t put everything into super.

If you expect that your taxable income will be substantially lower next financial year (2018/19) and you have investment loans, then perhaps pre-paying next year’s interest in advance might help reduce your tax burden this year. You will need to switch your loan to a fixed rate product (banks normally offer discounted fixed rates for this).

But make sure that you do your sums to ensure its worthwhile. Many people over-estimate the benefit of pre-paying interest. Contact us if you which to discuss this further.

If your spouse will earn less than $40,000 this financial year then you might consider making a contribution of up to $3,000 into their super account. If you do this, you can obtain a tax offset of up to $540 (it’s a tax offset, not deduction, which means whatever tax you are liable for is reduced by up to $540). See here for more inform<