June 30 strategies shift to year-round planning
The focus is now on optimising your annual super contributions, rather than simply minimising tax
By Steve Blizard
Taxpayers’ frantically hunting down financial advisers for last minute financial end-of-year tax strategies hails from a bygone era.
Today, smart investors take strategic action well over 12-months in advance.
Organising an investment health check well before 30 June ensures all the essentials are nailed down for the forthcoming financial year.
The good news is that superannuation can attract healthy tax savings, self-employed included.
With most Australians subject to lower pre-tax limits, the focus is now on optimising your annual super contributions, rather than simply minimising tax.
Adding to your super salary sacrificing can be a tax effective if your marginal tax rate tops 15 percent.
It is critical to check all contributions, as excess salary sacrifice contributions plus the nine percent super guarantee can push someone over the limit.
If you are aged over 55, and in particular if over age 60, a transition to retirement (TTR) strategy may provide significant tax benefits, while maintaining your present income.
This strategy sees people working between 55 and 64 accessing part of their retirement savings through a regular income stream, supplementing any other earned income.
The key benefit is that from 55 to 59, the pension income brings a 15-percent tax offset.
From ages 60 to 64, the income is 100 percent tax-free. In addition, tax on fund earnings and any capital gains tax, drops to zero.
Pensions from Self Managed Super Funds need paying yearly; otherwise your pension account will incur additional tax.
The minimum income payment required for financial year 2010-11 is only 50 percent of the standard minimum.
Reviewing after-tax super caps can also be critical.For example, if you are 64, you may not want to contribute $150,000 this financial year, as you would miss the three-year $450,000 non-concession limit advantage.
A valuable opportunity is the co-contribution super benefit.
Providing eligibility rules are met, you may receive the full co-contribution benefit if your income is equal to $31,920, cutting out at the $61,920 threshold.
When borrowing to invest, prepayment of interest payment can bring forward tax savings.
Of course this must be balanced against where interest rates may be heading.
With investment markets having rebounded, creating new capital gains, triggering capital losses accrued during the global financial crisis may be considered.
If you have held assets for less than one year and plan to sell, you should consider delaying the sale until the 12 month ownership period elapses, taking advantage of the capital gains tax discount concession.
Income protection insurance cover can provide up to 75 percent of your salary if you are unable to work due to illness or injury.
The premiums are tax-deductible and can also be pre-paid for the next 12 months, bringing forward a full tax deduction this financial year.
If you have taken redundancy, cashed in assets, or received some form of one-off income, you may have been pushed over the Medicare Levy surcharge threshold.
If you don’t hold private health insurance cover, you should review your situation.
To arrange your financial health-check, call our office on 9379 3555, or email Steve Blizard, today.