With the end of the financial year fast approaching, now is a good time to review your finances to ensure you have taken advantage of the opportunities available to you.
Below we have outlined some tips and strategies you may consider to help minimise tax and maximise your savings.
Are you self-employed?
You may be able to claim a tax deduction for up to $30,000 of personal super contributions.
If you are eligible, claiming a tax deduction for your personal superannuation contributions can reduce your tax payable.
To be eligible, income from employment as an employee must be less than 10% of your total assessable income. As an added bonus, if you were age 49 or over on 30 June 2015, you can claim a tax deduction for up to $35,000 of contributions.
Are you an employee of your own company?
Consider paying profits as tax-deductible employer contributions.
Using profits to pay an employer superannuation contribution instead of salary or dividend payments may provide a tax saving up to 34%. Employer contributions are taxed at only 15% in the fund, instead of paying tax up to 49% on other options. If using this strategy, ensure that the contribution limit of $30,000 per annum (or $35,000 if age 49 or over on 30 June 2015) is not exceeded.
Are you retired, a homemaker or unemployed (and under age 65)?
Consider making a deductible superannuation contribution to manage tax payable, particularly if large capital gains are anticipated.
If you are in one of these situations, you could be eligible to claim a tax deduction on your personal superannuation contributions. This can help to offset tax on other income, such as an assessable capital gain that you have realised this year. You should check whether you are eligible to claim a tax deduction and work with your tax adviser to determine how much to claim as a deduction, including consideration of contribution limits.
Will your spouse earn less than $13,800 this financial year?
Make a spouse contribution to superannuation and receive a tax off set up to $540.
If your spouse has assessable income below $13,800 you could receive a tax offset on the first $3,000 of contributions you make to their account. The eligible offset depends on your spouse’s income and the amount you contribute.
Will your income be less than $50,454 this financial year?
Make a personal after-tax contribution (up to $1,000) and get a 50% return if eligible for the Government co-contribution.
If you are eligible for a co-contribution this is the most effective way to contribute to superannuation as it provides an effective return of up to 50% on your eligible contributions. For each eligible $1 you contribute, the government will pay a co-contribution of 50 cents, up to a maximum co-contribution of $500.
You should check with us to see how much co-contribution you would be eligible to receive and how much you need to contribute.
Timing transactions
Timing transactions carefully can also provide tax advantages. For example, where possible:
bring forward the payment of deductible expenses before 1 July and delay receipt of investment income until the next financial year
prepay interest on margin loans and investment properties before 1 July
time the sale of investments so that realised capital gains can be offset against capital losses.
Planning for the financial year ahead
Even if you don’t have an opportunity to minimise tax for this financial year, now is still a good time to set up your plans for next year. Your opportunities are greater if you consider tax planning throughout the year, not just at year end.
Some ideas that may work for you include:
Hold investments in the name of the person with the lowest taxable income
Review your salary package for any tax effective options
Set up a salary sacrifice arrangement with your employer to contribute to super to boost your retirement savings and reduce tax
Make a tax deductible donation to charity
Hold insurance cover inside your superannuation fund to reduce the effective cost of premiums through tax concessions
Gear into growth investments if you can tolerate higher risk and have a long investment timeframe
Keep your medical receipts in case you spend over $2,265 (singles) or $5,343 (couples) in a year and are eligible to claim up to 20% as a medical expenses offset (you must have paid for medical expenses relating to disability aids, attendant care or aged care)
The information is general information only. It has been prepared without taking into account your individual objectives, financial situation or needs. Before implementing any of these ideas or strategies, it is important that you seek financial and taxation advice for your situation.
