Next week marks the start of winter and also the last month of what has surely been the most bizarre financial year in history. June 30 is a deadline for a whole range of things, so in this article we want to remind you of some of them. As the weather has gotten colder, why not make yourself a nice warm drink and read on.
Next week marks the start of winter and also the last month of what has surely been the most bizarre financial year in history. June 30 is a deadline for a whole range of things, so in this article we want to remind you of some of them. As the weather has gotten colder, why not make yourself a nice warm drink and read on. It might just make you some money.
Super – Contributions Going In
For most taxpayers, either they or their employer can claim a tax deduction for concessional contributions worth up to $25,000 per financial year. This $25,000 can be a combination of employer contributions (typically 9.5% of salary or wages, unless you ‘sacrifice’ a greater amount) and personal contributions (subject to age and employment rules). So, if you have some spare cash lying around, you might want to consider making a personal contribution to your super fund between now and June 30.
Concessional contributions are taxed at 15% in your fund but you get a tax deduction at your marginal tax rate. So, if that rate is higher than 15%, you end up with more in the fund. Please note there are various “fine print” rules for different contributions, this article describes the most common rules. Please obtain suitable personalized advice before proceeding with any of the strategies listed here.
In addition to $25,000 of concessional contributions, you may be able to also contribute up to an extra $100,000 of ‘non-concessional contributions.’ These contributions are not taxed in the fund and you do not receive a tax deduction for making them. But you do get the advantage of having your wealth accumulate within the superannuation system. For many people, this means they are ‘losing’ less from their investment earnings as tax over the years, while also enjoying other benefits such as asset protection from creditors.
The annual limit of $100,000 per person for non-concessional contributions can also be spread over a few years under what are known as ‘bring-forward’ rules. This can allow for a larger, irregular amount such as an inheritance or the proceeds of an asset sale to be moved into super all at once.
Speaking of non-concessional contributions, people who earn 10% or more of their income from eligible income may receive up to $500 as a Government ‘co-contribution’ if they make a non-concessional contribution. These co-contributions can be received by people aged 70 or younger. The co-contribution is calculated as 50% of the amount you contribute, up to a limit of $500. People with income of less than $38,565 can receive the full co-contribution. For income above this, the co-contribution tapers out. If your income is above $53,563, you won’t receive anything as a co-contribution.
The government is not the only other ‘person’ who can help with your super. If you have an eligible spouse, they can help provide a super benefit as well. If your spouse earns less than $40,000 and you make a non-concessional contribution into their super account, you may qualify for a tax offset of up to $540. This might not be enough to justify a marriage (formal or de facto), but if you have a spouse already why not put that person to good financial use!
Super – Pensions Coming Out
If you receive a pension from your super fund, then you must withdraw a minimum amount each year. As we reported recently, due to COVID-19 the Commonwealth has allowed people to withdraw less than the full minimum amount in the current and next financial years. This may help you avoid selling assets within your superfund to finance the full pension payment for this year and next.
That said, you do need to have withdrawn this ‘new minimum’ before June 30.
Super – Special Withdrawal
As we also reported a few weeks ago, the Commonwealth have allowed people negatively affected by COVID-19 to withdraw up to $10,000 from their super before June 30. After June 30, those people who qualify can withdraw up to another $10,000 if they wish (or a ‘first’ $10,000 if they did not make a withdrawal before June 30).
Special rules apply and these withdrawals do not suit everyone. It would be a good idea to talk to us before removing any money from super, to make sure it is really is in your best interests to do so.
This financial year has generally not been kind to investors. It may be that your portfolio is sitting on some unrealized losses. These can be useful in investment management and tax planning, so think about whether you can reduce the loss through some timely tax planning and asset management before June 30.
As you can see, what you do between now and June 30 will depend a lot on how the last eleven months have treated you financially. For many people, their end of financial year planning for 2019/2020 will be quite different to previous years. If you are unsure about any aspect of your year end financial management, please do not hesitate to get in touch with us so that we can talk through the issues and opportunities with you.