End of 2014-2015 Financial Year Checklist

shutterstock_81091840As we approach the end of financial year we look at some ways to help you maximise your investments and consider ways to be positioned well going into the next financial year. Superannuation and taxation strategies are typically complex and we would always recommend that you discuss your circumstances with your CA Financial Planner before taking any actions.

Maximise your ‘after-tax’ contributions for the year

Superannuation can be a tax-effective way to help you build wealth for your retirement. It makes sense to look at whether you have assets that can be contributed to superannuation to help maximise future earnings on those amounts. After tax, or ‘non-concessional’, contributions are one way to get more money into the superannuation system. These contributions are capped at $180,000 for the 2014-15 financial year.

If you are under age 65 on 1 July of the financial year, you can ‘bring forward’ two years of after-tax contributions giving you a total non-concessional contribution cap of $540,000 for the three years.

Maximise ‘before tax’ contributions for the year

Before tax, or ‘Concessional’ contributions can also be an effective way to contribute to superannuation as they are made from pre-tax income up to an annual cap. They can also help you reduce taxable income in the current year which could reduce your overall tax liability. Importantly the cap is based on the age of a person as at 30 June of the previous financial year.

However, you must be careful not to exceed concessional cap as there will be increased tax liabilities.

Income Year Cap for those aged 59 years or over on 30 June 2013 Cap for those aged 49 years or over on 30 June 2013 Cap for all other
2014-15 $35,000 $35,000 $30,000
2013-14 $35,000 $25,000 $25,000

Transition to retirement income stream opportunities

shutterstock_46886401A transition to retirement income stream provides those who are still working, but have reached preservation age (currently 55), with access to their superannuation in the form of a non-commutable account-based income stream. There are a number of benefits for you, including the ability to:

  1. continue working and increase the amount you currently contribute to super as a concessional contribution without reducing your current level of income;
  2. reduce work hours and maintain your current level of income;
  3. rollover money from the superannuation environment where earnings are taxed at a rate of up to 15% into the pension environment where earnings are not taxable.

 

This is complex strategy to implement, so getting the right advice is crucial.

Take advantage of the spouse contributions tax offset

Spouse contributions are after tax contributions that you can make on behalf of your spouse. A key feature of this type of contribution is that the contributing spouse may be eligible for a tax offset of 18% on contributions up to $3,000.

To be eligible:

  • you must make a non-concessional contribution into your spouse’s complying super fund in the financial year and not claim a tax deduction for the contribution ;
  • your spouse must be under age 65 or if has reached age 65 but is under age 70, must meet the work test ;
  • you and your spouse must be Australian tax residents ;
  • at the time of making the contribution you and your spouse are not living separately and apart on a permanent basis; and
  • your spouse’s total income must be less than $13,800 in the financial year. Spouse contributions count towards the spouse’s non-concessional contributions cap.

Contribution splitting opportunities

shutterstock_65546197Contribution splitting gives you the opportunity to increase your spouse’s superannuation, using money they have accumulated within superannuation. In summary, you can split up to 85% of concessional contributions (up to the concessional contributions cap) where your spouse:

  • has not reached preservation age, or
  • has reached preservation age but is under age 65 and has not retired.

On ways to split a contribution, we would recommend that you speak to your CA adviser.

Ensure Tax File Number has been provided to super fund

If your super fund does not have your Tax File Number (TFN) before the end of the financial year, your employer contributions will incur a 15% contributions tax plus an additional 31.5% no-TFN contributions tax and your super fund may not be able to accept any personal contributions.

Look to bring forward deductions into this current year

Maximising net income and investing tax effectively are important goals. Therefore, it is a good time to consider pre-paying/bringing forward any tax deductible expenses. These include:

  • donations to charity;
  • premiums for Income Protection Insurance held outside of superannuation environment;
  • interest payments on investment loans; or
  • the cost of maintenance and repairs to investment properties.

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As always, planning ahead can place you in a better financial position. Talk to your Financial Adviser if you have any questions around these points, or if you believe they may be relevant to your situation.

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