With the end of the financial year looming, now is the perfect time to review your financial position, and to take advantage of any opportunities in the current financial year. Here’s a few strategies to consider:
Tax Deductions – it’s all about timing
As much as it’s possible, you should be looking to claim deductions in the financial year that will have the most impact. This might mean incurring deductible expenses by 30th June to reduce your taxable income in this financial year. Or, if your marginal tax rate is expected to be higher next financial year, delaying your deductible expenses until after 30th June.
Some deductible expenses you might considering bringing forward to this financial year include:
- Repairs and on-going expenses to an investment property.
- On-going expenses incurred running your business.
- Eligible self-education expenses
- Home office expenses
You may also have on-going expenses that are tax deductible. These include:
- Interest on an investment loan.
- Income Protection Insurance.
- On-going advice or investment fees incurred by you in relation to investments that produce assessable income.
Fringe Benefits Tax changes to entertainment benefits
There’s also been a further crackdown on entertainment expenses. From 1st April 2016, all employers need to include salary packaged meal entertainment expenses when determining whether the $2000 Fringe Benefits Tax (FBT) reporting threshold has been exceeded. Changes also apply to not-for-profit employers. From 1st April 2016, a $5000 cap applies to not-for-profit employers who provide salary packaged meal entertainment expenses. Where the $5000 cap is exceeded, the excess is added together with other fringe benefits to determine whether the $17,667 or $31,177 caps that apply to not-for-profit employers have been exceeded.
Superannuation – how to make it work super hard for you
There’s still time to juggle your super contributions for this financial year, and to take advantage of government incentives to maximise your retirement savings. Let’s start with concessional and non-concessional caps.
Adjusting your existing salary sacrifice
If you’re an employed client who is already maximising your concessional cap, then you may need to adjust your existing salary sacrifice contributions from the start of, or early in the financial year, if there’s been an increase to your employer’s Superannuation Guarantee contributions. There might be several reasons for this including:
- Salary increases applying from 1st July 2016 (or shortly afterwards) impacting the calculation of Superannuation Guarantee.
- The Superannuation Guarantee maximum earnings base increasing from 1st July 2016, which means employers will be required by law to pay Superannuation Guarantee on earnings of $206,480 (rather than $203,240 for this financial year).
Important timeframes for tax-deductible contributions
If you make a personal super contribution and wish to make a tax deduction, then generally you must lodge a ‘notice of intent’ to your super fund (and have your notice acknowledged in writing) by the earlier of:
- When you submit your tax return for the financial year of contribution,
- 30th June in the financial year following the year of contribution.
It’s important to remember that even if you do not submit your tax return for 2014-15 by 30th June 2016, you will no longer be able to lodge a valid notice of intent after 30th June 2016, which means you won’t be eligible to claim the deduction.
The same timeframes and deadlines also apply if you’re wanting to submit variations to notices that you have previously supplied to your super fund.
Social Security – changes to the ‘assets test’
From 1st January 2017, there will be several changes to the assets test, which may reduce your social security payments. (In fact, in some cases this will reduce pension entitlements to nil). The good news, however, is that you’ll have until the end of the year to work out a strategy that’s right for you (and there’s plenty of options). Strategies to consider include:
- maximising the super balance of the younger member of a couple (where one is under the age pension).
- purchasing long-term annuities with a depleting asset value.
- making improvements to your principal home
- gifting within allowable limits.
- gifting more than 5 years before qualifying for a social security pension
- purchasing funeral bonds or prepaid funerals.
* Source: End of Financial Year Strategies (Colonial First State)
For specific financial planning advice, please call our office to organise a meeting with our financial planning team on (03) 6275 5400.