Being super smart before the end of financial year

Written by Shereen Churchill (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.

The importance of making the most of the opportunities prior to 30th June this year is more important than ever. This is because in the 2016 Federal Budget, the Government announced proposals to be introduced in July 2017 which will result in the greatest change to the superannuation system in a decade. These proposals have now been finalised and entered into law.

There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.

Here are 10 ideas that we will be considering with our clients this end of financial year:

  1. If you have more than $1.6m in super, this financial year might be your last opportunity to make a non-concessional contribution. If you are close to $1.6m, it could be worth bringing forward contributions.
  2. If you are a retiree with a pension over $1.6M, take action before 1 July to remain compliant with the new rules. Before your fund’s 2017 tax return is lodged, you need to have made your election whether you want to take up the transitional CGT relief. There is no one-size fits all strategy for this complex change and therefore needs to be considered on a fund by fund basis.
  3. If you have an existing transition to retirement income stream (TRIS), consider the viability of continuing the TRIS given the loss of the tax-exempt treatment and the reduction in the concessional cap. Also give consideration to your eligibility to commence a retirement phase pension to retain the tax-exempt status.
  4. If you have a combination of a defined benefit pension and retirement phase pension, your super potentially faces being wholly or partially wound back from July 1 to a taxable accumulation account as a result of the pension transfer rule. Refer to points 1 and 2.
  5. If you have an existing salary sacrifice arrangement in place giving you total concessional contributions over $25,000 per annum, make plans to reduce your salary sacrifice arrangements from 1 July to ensure you don’t exceed the new lower cap. Given the change that enables everyone to make personal concessional contributions next year, you might want to consider cancelling it entirely.
  6. If you are self-employed or have significant investment income or capital gains (ie; less than 10% of your income comes from being an employee), consider claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Contribution caps are a use it or lose it opportunity so don’t miss out on saving up to 34% tax.
  7. If you have excess savings or investments that you don’t need access to before retirement, consider transferring this wealth into super. This may reduce tax paid in your personal name and build your wealth for retirement.
  8. If your taxable income is less than $51,021 and more than 10% of this came from working, consider making a personal after-tax contribution to super. This may qualify you for a government-contribution of up to $500.
  9. If your spouse earns less than $13,800, consider making an after-tax contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax.  You may receive a tax offset of up to $540.
  10. If your spouse has less super than you, consider splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).

Whilst these ideas might get you thinking, it is important to consider the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.

This information has been prepared and issued by ITL Financial Planning and is current as at 10 May 2017. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.