The end of the 2020-21 Financial Year is fast approaching and there is only a limited amount of working days left to take advantage of some strategies.
Here are a few of the major considerations that may affect you across superannuation and tax planning:
Things to consider with Superannuation:
- If planning to make additional superannuation contributions, consider making them well in advance prior to 30 June to ensure they are received by your super fund on time. Contributions made by EFT or BPAY, are not deemed to have been made until the money appears in your super funds bank account. This could be some days after your initiate the transfer.
- Concessional contributions include contributions made by an employer such as the 9.5% superannuation guarantee, salary sacrifice contributions and personal tax-deductible contributions. The maximum concessional contributions that may be made this financial year is $25,000.
- The rules around making personal tax-deductible contributions have been relaxed significantly. Most people, not just the self-employed, may be able to claim a tax deduction for their personal contributions. However, contributions are subject to limits and can generally only be made by people under 67, unless they continue to work. Speak to us about this opportunity to ensure a tax deduction is valid.
- If you are aged 65 or older and have sold your main residence in the last financial year, you may be able to make a downsizer contribution of up to $300,000 ($600,000 for a couple) into your super account before 30 June. Downsizer contributions allow you and your partner to each make contributions into your super accounts if you owned your home for a minimum of ten years. This one-off contribution isn’t counted towards your annual concessional or your non-concessional contributions caps and is available regardless of your total super balance (TSB).
- If your total income is less than $54,837 and you derive at least 10% of your income from employment or self-employment, and you make a personal non-concessional contribution to super, you may be eligible to receive a Government co-contribution of up to $500.
- People who make a contribution to super for their spouse may be eligible to receive a spouse contribution tax offset of up to $540. A spouse contribution tax offset is available where an eligible spouse for whom a contribution is made has income less than $40,000.
- With the introduction of limits people may now have in a superannuation pension account, the ability to split contributions between spouses, and therefore move towards equalizing super, is more important than ever. There is still time to split up to 85% of concessional contributions made in the 2019-20 financial year. Concessional contributions made in 2020- 21 may be transferred to a spouses account after 30 June 2021.
- From the 1st July 2017, we saw the intro- duction of the ‘transfer balance cap’. This restricts the maximum amount that may be transferred to a super pension or in come stream (these terms are inter changeable). The transfer balance cap remains at $1.6m.
- There are occasions when concessional or non-concessional contributions to super exceed the permissible limits. If this happens, the ATO will issue an excess contribution determination. If you receive this notice, it is essential you contact us immediately, even if you think an error has been made. There are strict timeframes that must be adhered to in order to minimize penalties.
Things to consider with Tax:
- Pre-pay deductible expenses—if you have expenses that are tax deductible, consider paying them before 30 June in order to bring forward your tax deduction to the current financial year.
- Defer income—where possible consider deferring income until after the end of the financial year, or where your tax rate is likely to be higher in the 2022 financial year, consider bringing income forward to the 2021 financial year.
NOTE: the Contract Date (not the Settlement Date) is generally the key date for working out when a sale or purchase occurred.
- Realise any capital losses and reduce gains – Neutralise the tax effect of any captial gains on your investments you have made during the year by realising capital losses – that is, sell the asset and lock in the capital loss. These need to be genuine transactions to be effective for tax purposes.
- Planning to retire, or stop working? – If so, consider deferring your plans to stop working until early in the next financial year. Any lump sums you receive from your employer such as payments for accrued annual leave or long service leave, will be taxed in the year they are received. If your tax rate is likely to drop in the 2022 financial year, deferring leaving work may result in a lower rate of tax being payable.
- Tax deductible super contributions— as detailed in ‘things to consider with superannuation’.
- Maintain good records – there is nothing more frustrating than not being able to find receipts and payment records when tax time arrives. Consider using an app or other web-based solution for recording expenses and maintaining your vehicle log book.
The topics covered above are a snapshot of some of the things to consider as we head towards the end of the 2021 financial year.
If the recent 2021-22 Budget proposals pass Parliament and become law, then we expect quite a few changes to be made in 2022!
Tax discussions should always be run through your tax agent or Accountant as well.