EOFY Tax & Financial Planning Strategies
- Published: June 4, 2019
- Author: Asparq
It is at this time of the year that many people turn their minds to tax and financial planning strategies. In truth, the best time to turn your attention to tax and financial planning strategies is as early in each tax year as possible.
Please be aware that the information regarding superannuation is factual only and is not intended as appropriate advice for your specific circumstances. If you would like to discuss any of these issues further please contact us.
You can make concessional (tax-deductible) contributions up to the limit of $25,000 during the year ending 30 June 2019. These can be from your employer or made personally (see below). It is important not to exceed the maximum contribution limits because any excess contributions are taxed at the maximum marginal rate of tax. We have seen many examples of people paying excess contributions tax, simply because of the timing of payments. Superannuation funds record contributions when they are received (say July) even if the contributions relate to a different period (say June).
Extra contributions tax for people with income greater than $250,000
Individual taxpayers are liable to pay additional tax if the sum of their income and concessional contributions is greater than $250,000. This will effectively mean that those people whose income and concessional contributions are greater than $250,000 will be required to pay additional tax of 15% on some or all of these contributions.
Individuals are able to make an after-tax contribution to their superannuation fund and have the government also contribute up to $500. Individuals will be eligible for a co-contribution if their assessable income including fringe benefits and reportable superannuation is less than $52,696 for the 2018/19 year. They should be earning 10% or more of their income from employment, running a business or both.
Spouse Superannuation Contribution
If a person has adjusted taxable income of less than $37,000 then that person’s spouse can make a contribution of up to $3,000 to their spouse’s superannuation fund and receive a tax offset of up to $540. The tax offset reduced one the receiving spouse’s total income exceed $37,000, cutting out at $40,000.
Most people are able to make non-concessional contributions (non-tax-deductible contributions) of up to $100,000 per year, and in many cases a “bring forward” rule allows contributions of $300,000 in one year. These contributions caps may be affected by contributions made in prior years. Individuals with more than $1.6 million in super are not eligible to make non-concessional contributions. With the rate of income tax and capital gains tax for superannuation funds being 15% and 10% respectively (for most funds), tax on income earned in a superannuation fund from investments is usually much lower than the tax paid on earnings from investments not in a superannuation fund.
Managing Capital Gains Tax
If you have incurred capital gains during the year, tax will have to be paid on these gains. If you also have investments that will incur a loss if you sell them, consider selling them and realising the loss before 30 June to offset the capital gains.
Prepay deductible expense
A tax deduction may be claimed for up to 12 months’ worth of interest prepaid on an investment loan on a rental property, or margin loan on a share portfolio or managed investment, provided the loan has a facility allowing this. In addition, the payment of other deductible expenses, such as professional memberships or pre-paying income protection insurance by 30 June 2019 reduces taxable income.
If you would like to discuss any of the strategies set out below or any other tax, business or financial related issues, please do not hesitate to contact us.
Work related expenses
Broadly speaking any expense incurred in order to derive assessable income is deductible against that income. Some exceptions exist, most significantly where the expense is private or domestic in nature. We encourage you to keep all receipts relating to work related expenses and we are happy to discuss them with you at any time.
Instant Asset Write-off Increased and Extended
The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7.30pm on 2 April 2019 until 30 June 2020.
Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:
- $30,000, from 7.30pm on 2 April 2019 until 30 June 2020
- $25,000, from 29 January 2019 until before 7.30pm on 2 April 2019
- $20,000, before 29 January 2019.
Motor Vehicle Deductions
There are only two methods allowed by the ATO to claim motor vehicle expenses. The cents per kilometre (capped at a maximum claim of 5,000 kms) and logbook methods. If your use of your car for employment or business purposes is significant, we suggest you complete a logbook to maximise tax deductions. The logbook needs to be kept for 12 consecutive weeks and record all forms of travel (both work/business and private travel) to establish the logbook tax-deductible percentage. Logbooks are then valid for 5 years unless there is a significant change in use and can apply to new vehicles acquired during the period. You also need to keep good records of all your motor vehicle costs in order to claim the logbook percentage of expenses in your tax return.
Income Protection & Life Insurance
It makes sense to periodically review income protection insurance – and any person who does not have this insurance should consider taking it. The review should consider the level of cover, the waiting period before insurance is paid when a claim is made (this can dramatically affect the monthly premium), and who owns the policy (if it is a superannuation fund, for example, it may not be possible for the superannuation fund to pay the proceeds to the claimant). In addition, if you hold the policy in your own personal name, the premiums should be tax deductible.
Life insurance, like income protection insurance, should be regularly reviewed to ensure the level and type of cover is appropriate.
Wills & Powers of Attorney
Every person should have a current will. Even once you have a will in place, it is a document that should be reviewed regularly and especially when personal circumstances change. It is important that your will reflects your current wishes so that if you were to pass away, these wishes are properly fulfilled. Powers of attorney for medical and economic purposes are also a useful tool to determine who can act on your behalf if you become incapacitated.
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.