As 30 June approaches it is important to make the most of any tax deductions available to you. This year in particular there are new strategies that may not have been available to you in the past.
Employees now eligible for personal tax deductions for super contributions
Previously employees had been locked out of being able to claim a deduction for personal contributions. Employees have been limited to salary sacrifice contributions and making sure that you do this throughout the year.
With the 2016/17 budget changes comes a great new opportunity for you to make a personal contribution to superannuation and claim a tax deduction at any time in the financial year. This provides significantly more flexibility than the old salary sacrifice arrangements as we can now do a one-off contribution in June to top up your total contributions to $25,000 or a lesser amount that is most tax effective for you. By doing it in June your contributions for the full financial year are known and we can therefore accurately assess the maximum amount that you can claim.
This opportunity also comes in handy if you have other assessable income including capital gains or investment income and have not been able to salary sacrifice the maximum amount throughout the year. We have used this strategy to allow an employee on a wage of $40,000 that has just sold a property with a significant capital gain to top up their deductible contributions to the full $25,000. This opportunity did not exist 12 months ago and could benefit people in a number of different circumstances.
I also find it useful for people on casual employment, variable employment or have worked through part of the year and have not been able to maximise their super through salary sacrifice.
Maximise the amount that you can move into superannuation
If you are nearing retirement and would like to move your assets into a tax-free pension you are still able to make $100,000 contributions to superannuation every financial year if you are under 65 or meet the work test if over 65, and your superannuation balance is under $1.6 million. You may also be eligible to do 3 years in one or $300,000 in one hit. A strategy that can work really well is to make a $100,000 contribution right now before 30 June and make an additional $300,000 contribution in July and thereby adding $400,000 to your superannuation in less than a month. These contributions can then be converted to a tax-free pension in July if you have reached your preservation age.
Obtain a 50% return from the government
If you earn less than $51,813 this financial year from your job or business then you may be eligible to receive a government co-contribution of up to $500 if you make a $1,000 contribution to superannuation after-tax. Please note that you need to earn something from either work or business to take advantage of this contribution.
Prepayment of expenses including interest
If you prepay any deductible expenses before 30 June you are able to claim a tax deduction this financial year. By bringing forward the payment of these expenses you will bring forward the benefit to this year. A popular strategy is to borrow to invest in either property or shares and prepay the interest for the next 12 months in June and in so doing claim the large tax deduction this year. This strategy needs to take into consideration your overall financial plan and risk appetite, and should not be thought of as a short-term tax planning strategy.
As you can see there are a number of strategies that you should consider before 30 June. Talk to your Altitude Adviser as soon as possible to determine what might be appropriate in your situation
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