If you would like the opportunity to boost your super, achieve tax efficiencies and improve your financial situation, you will need to take action before the end of the financial year on 30 June 2017.
Whether you are a young single, growing your family, a business owner, SMSF Trustee, pre-retiree or retiree, there are strategies you should consider.
End of Financial Year Strategies for Young Professionals and Families
- Boost your super before contribution caps for super are reduced
Take advantage of the current caps for concessional and non-concessional super contributions before they are significantly reduced on 1 July 2017. In the current Financial Year, you are allowed to make up to $30,000 (or $35,000 if you are over 50) in pre-tax (concessional) contributions.
Consider boosting your super balance with after-tax (non-concessional) contributions and make the most of the current allowance of $180,000 per annum or $540,000 using the bring-forward rule, before these change on 1 July 2017.
- Review your salary sacrifice arrangements to avoid penalties
From 1 July 2017, the cap for pre-tax or concessional contributions will reduce to $25,000 per annum (currently concessional contributions are $30,000 per annum or $35,000 per annum if you are over 50), so you need to review your arrangements to ensure you will not exceed the new cap in the 2017/18 financial year.
- Higher income earners should consider tax implications for concessional contributions
The income threshold, applicable for the additional contributions tax, for higher income earners will be reduced from $300,000 to $250,000 per annum from 1 July 2017. This means if you earn over $250,000 per annum you will be liable to pay 30% tax (as opposed to 15%) on concessional contributions into super.
- Consider making spouse contributions to super
You can receive a tax-offset of up to $540 if you are making contributions to your spouse’s super, if your spouse’s income is less than $10,800 per annum.
- Consider your super investment strategy
It’s important to review your super investment strategy on a regular basis to ensure the strategy and risk profile is still appropriate for your needs and stage of life.
- Consider pre-paying tax deductible expenses to make the most of tax deductions
You may be able to pre-pay expenses such as investment loan interest and income protection insurance to bring forward deductible expenses and reduce your taxable income for this financial year.
- Review your private health insurance position
If you earn more than $90,000 (or $180,000 for couples/families), and don’t have private health insurance, you will be liable to pay the Medicare Levy Surcharge which is on top of the 2% Medicare Levy. Additionally, the Lifetime Health Cover is a 2% loading which is payable on top of your private health insurance premium for every year you are over age 31 without holding private health insurance.
- Claim donations to charities
Any donations over $2 made to a charity, or Deductible Gift Recipient, are tax deductible.
Things to be aware of:
- Be careful not to exceed your concessional and non-concessional caps – penalties apply. Make sure you consider what other contributions that you have made personally or that have been made on your behalf – such as employer contributions.
- All contributions to super are preserved until you meet a condition of release such as retirement.
- Concessional (before tax) contributions such as salary sacrifice contributions and employer super guarantee contributions are taxed at 15% (unless the high income earners’ additional contribution tax applies).
End of Financial Year Strategies for Business Owners
- Seek professional tax advice
Seeking advice from a tax professional may help you take advantage of tax effective strategies for your personal situation such as deferring income or deferring the sale of assets.
- Make employee super contributions
If you have paid yourself or any employee wages this financial year, you are obligated to pay Superannuation Guarantee contributions of 9.5%. It’s important to consider scheduling your payments to take into account the time required by clearing houses to transfer funds into individual super accounts. For payments made to be tax deductible in the 2016/17 year, they need to be processed by the super fund on or before 30/06/2017, and many super funds have cut off dates prior to June 30.
- Claim your personal contributions to super
You can claim your concessional contributions to super as a tax deduction. You can make personal contributions of up to $30,000 (or $35,000 if you are over 50) this financial year. If you claim a tax deduction for super contributions you will need to lodge a ‘Notice of Intent’ form and meet the conditions of the 10% income test rule.
End of Financial Year Strategies for Pre-retirees and Retirees
- Take action if your super balance is over $1.6 Million
From 1 July 2017, if your super balance reaches $1.6 Million, you will no longer be able to make non-concessional contributions.
If you have retired, you will need to ensure the total value of your retirement phase income stream is below $1.6 Million.
- Reconsider your Transition to Retirement strategy
From 1 July 2017, the assets which support a Transition to Retirement income stream will no longer be tax free. If you have or are considering a Transition to Retirement strategy you will need to seek advice to understand the tax implications for your circumstances.
End of Financial Year Strategies for SMSF Trustees
- Make pension payments to members
If your fund is paying a pension to members, the minimum pension payment must be made by 30 June 2017 to avoid penalties.
- Review Limited Recourse Borrowing arrangements
It’s important to review payments and confirm all payments have been made and that loan paperwork is in order.
With so many changes to super coming into effect from 1 July 2017, it is especially important to consider end of financial year strategies relating to super. Read more for further information on what you need to consider when it comes to super.
I encourage you not to leave your end of financial year planning until the last minute. Please contact us now on 07 3720 1299 or email admin@wealthfundamentals.com.au
Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Wealth Fundamentals strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances. This information is based upon our understanding of legislation at the time of writing. Such legislation may be subject to change.
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