Tax Tips for End of Financial Year
As we approach the end of the financial year, it’s time for both individuals and businesses to ensure tax affairs are in order and to consider key tax planning strategies.
In this article, we highlight some of the more general tax planning strategies. Please contact the team at Patrick Rowan & Associates to discuss your personal situation.
End of Year Tax Hints
Make a Superannuation Contribution
HINT: Tax deductions for your superannuation contributions will only be available in the 2017 tax year if the contribution is received by the superannuation fund by 30 June 2017.
For the 2016/17 financial year, non-concessional (or after tax) super contributions are capped at $180,000 per person per year or $540,000 ($1,080,000 for a couple) over three years using the bring forward provisions.
Concessional contributions, or those made with pre-tax money, are currently limited to $30,000 per person per year. If you are 49 or over on 30 June 2016, this cap increases to $35,000.
Please note, the above limits will be reduced from 1 July 2017 – $25,000 for Concessional contributions caps – $25,ooo and $100,000 for non concessional.
Make Super co-contributions
If you earn less than $36,021 (including reportable fringe benefits) and make an after tax contribution to super of $1,000, you will be eligible for the maximum super co-contribution of $500 from the Government. The co-contribution amount reduces by 3.33 cents for every dollar of income over $36,021 and phases out completely once you earn $51,021.
The ATO uses information on your income tax return and contribution information from your super fund to determine your eligibility.
If you want to split your super contributions with your spouse, please note, this can only be done in the year after the contributions are made.
Therefore, from 1 July 2017, you are able to split up to 85 per cent of any concessional (or pre-tax) contributions you made during the 2016/17 financial year with your spouse.
A salary sacrifice strategy allows you to make contributions to super from your pre-tax salary. Your salary is then reduced by the amount you choose to sacrifice and the benefits of this are two-fold: not only does your super balance increase, but this strategy could also reduce your taxable income and therefore the amount of tax you pay.
Superannuation contributions are concessionally taxed at just 15 per cent (up to 30 per cent for individuals with income over $300,000) instead of your marginal tax rate, which could be as high as 49 per cent – leaving you more to invest in super.
Capital gains and losses
A capital gain arising from the sale of an investment property or shares may be offset by capital losses.
For example, you may have had to sell investments that were no longer appropriate for your circumstances and any capital losses realised as a result can be offset against any capital gains you have realised throughout the year.
Unused losses can be carried forward to offset gains in future years.
HINT: Need to make a trip to inspect your residential property?
Do it before 30 June to obtain a tax deduction! The recent residential budget has removed deductibility for travel expenses incurred to inspect a residential rental property from 1 July 2017
If you have an investment loan you can arrange to prepay the interest on that loan and claim a tax deduction in the same year the interest has been prepaid.
Income protection insurance
If you hold an income protection policy in your name, then any premium payments you make are tax deductible. So, be sure to review your insurance.
Tax rates for 2016/17
Individual tax rates for the year ended 30 June 2017
Up to $18,200 Nil
$18,201 to $37,000 19% of the portion over $18,200
$37,001 to $87,000 $3,572 + 32.5% of the portion over $37,000
$87,001 to $180,000 $19,822 + 37% of the portion over $80,000
Over $180,000 $54,232 + 47% of the portion over $180,000
If you have any queries on end of year tax planning strategies, please contact Patrick Rowan & Associates, Geelong. Tel: 5221 7655
These materials are intended to be used as a guide only. They should not be relied upon as a substitute for professional advice regarding actual facts or circumstances.
Patrick Rowan & Associates, its employees and agents do not accept any liability for any injury, loss or damage resulting from any person acting, or refraining to act, in reliance on all or part of these materials.