The end of the 2018-19 Financial Year is fast approaching and as it occurs on a Sunday this year there is only a limited amount of working days left to take advantage of some strategies. It is important to remember that Electronic Funds Transfer (EFTs) and BPAY payments can still take 2 – 3 days to process so make sure that you are prepared well before the week starting Monday the 24th of June to avoid missing the cut-off.
As such below 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, remember that 30 June falls on a Sunday this year. Consider making them well in advance at the end of the year to ensure they are received by your super fund on time. Contributions made by electronic funds transfer, e.g. BPAY, are not deemed to have been made until the money appears in your super funds bank account. This could be some days after you 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, are able to claim a tax deduction for their personal contributions. But limits apply and steps need to be taken to ensure a tax deduction is valid.
- Do you hold insurance through your super? If so, legislation passed in February 2019 may result in people with inactive superannuation accounts finding that their insurance cover held inside their super fund is being cancelled. This will apply from 1 July 2019. If your super fund determines your account is inactive, they will write to you and inform you of the pending cancellation of your insurance. If you receive such a letter from your super fund, it is important that you contact us without delay. Your insurance may be retained by either making a contribution to your super fund, or by making an election to retain your insurance.
- If your total income is less than $52,698 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 of 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 equalising super, is more important than ever. There is still time to split up to 85% of concessional contributions made in the 2017-18 financial year. Concessional contributions made in 2018-19 may be transferred to a spouses account after 30 June 2019.
- On 1 July 2017 we saw the introduction of the ‘transfer balance cap'. In simple terms, this restricts the maximum amount that may be transferred to a super pension or income stream (these terms are interchangeable). The transfer balance cap is currently $1.6m.
- There are occasions when concessional or non-concessional contributions to super exceed the permissible limits. If this happens, the Australian Taxation Office will issue an excess contribution determination. If you receive a determination 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 minimise penalties.
- Are you running a small business and have sold the business or any of the businesses assets? If so, you may be eligible to take advantage of the small business capital gains tax concessions. Not only do these concessions save you tax, but may enable you to make additional contributions to superannuation without being constrained by the concessional and non-concessional contribution caps.
- The Australian Taxation Office is holding more than $17.5bn of lost and unclaimed superannuation on behalf of Australians. We can assist you in searching for any lost superannuation you may be entitled to.
- One of the attractions of superannuation is the ability to draw a very tax effective income once you retire. However, to receive favourable tax treatment, a minimum amount of income must be drawn each year. Check to ensure you have drawn the prescribed minimum level of income before the end of the financial year.
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. Also, if you run an eligible small business, the instant asset tax write-off that was available in past financial years has been extended to 30 June 2019.
- Residential rental properties – travel expenses – for investors that have residential rental properties, the tax deduction for travel expenses to inspect the property was abolished from 1 July 2017.
- 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 2020 financial year, consider bringing income forward to the 2019 financial year.
- 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 and long service leave, will be taxed in the year they are received. If your tax rate is likely to drop in the 2020 financial year, deferring leaving work may result in a lower rate of tax being payable.
- Tax deductible superannuation contributions – from 1 July 2017, claiming a tax deduction for personal superannuation contributions got easier. Tax deductions are now available to a much wider group of taxpayers. However, contributions are subject to limits and can generally only be made by people under the age of 65, unless they continue to work. Speak to us about this opportunity.
- 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.
- Net Medical Expenses Offset – this financial year is the last year the offset will be available for costs associated with disability aids, attendant care, and aged care fees.
- Private health insurance – having your own private health insurance may deliver a number of benefits including:
- Being eligible to receive the private health insurance rebate;
- Avoiding the Medicare levy surcharge; and
- Avoiding the lifetime health cover loading if private insurance is not taken out before turning 30.
The topics covered above are a snapshot of some of the things to consider as we head towards the end of the 2019 financial year. With regard to tax it’s important that you discuss these considerations with your tax agent or accountant as well.
If you have any questions about the issues raised, or if you would like to simply check that everything is on track, please don’t hesitate to contact your Pinnacle adviser to discuss further.