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News Bulletin : ADA News Bulletin June 2011
47 JUNE 20 11 SMART YEAR END STRATEGIES With the end of the financial year looming it is time to think about what you can do to build and protect your wealth in a tax effective manner. However, you will need to take action before 30 June to benefit from the opportunities available this year. Table 1 outlines strategies with tax advantages for this financial year and each of these strategies has the potential to make a significant difference to your financial situation right now. Table 1 Super strategies If you... You may want to... So you can... 1. Get more from your bonus Are likely to receive a bonus from your employer Salary sacrifice your bonus into super rather than receive it as cash • Reduce tax on your bonus by up to 31.5% • Make a larger after-tax investment 2. Make tax deductible super contributions Earn less than 10% of your income1 from eligible employment (e.g., you are self- employed or not employed) Invest in super and claim your contribution as a tax deduction • Use the deduction to offset taxable income and save on tax • Build and protect wealth outside your business (if applicable) 3. Get a super top up from the government Earn less than $61,9201 pa, of which at least 10% is from employment or a business Make a personal after-tax super contribution • Qualify for a government co-contribution of up to $1,000 • Increase your retirement savings 4. Boost partner's super and reduce your tax Have a spouse who earns less than $13,8001 pa Make an after-tax super contribution on their behalf • Receive a tax offset of up to $540 • Increase your spouse's retirement savings 5. Pay less tax on investment earnings Have an investment in your own name Cash out the investment and use the money to make a personal after-tax super contribution • Reduce tax on investment earnings by up to 31.5% • Increase your retirement savings 6. Use super to manage CGT Make a capital gain on the sale of an asset this financial year and earn less than 10% of your income1 from eligible employment Invest sale proceeds in super and claim a portion of the contribution as a tax deduction • Use the deduction to offset your taxable capital gain and save on tax • Increase your retirement savings 7. Make insurance more affordable • Are eligible to make salary sacrifice super contributions • Are eligible to receive government co-contributions • Have a spouse who earns less than $13,8001 pa • Earn less than 10% of your income1 from eligible employment Purchase life and total and permanent disability insurance in a super fund • Benefit from your tax concessions • Make premiums more affordable 8. Pay less tax on super benefits Are under age 60 and want to cash out some of your super Delay the withdrawal until you reach an older age bracket (e.g., 60 or over) • Save lump sum tax • Make a larger after-tax investment Note: To use strategies 1 to 8, you generally need to be eligible to make super contributions. Furthermore, you won't be able to access your super until you satisfy a condition of release. 1 Includes assessable income, reportable fringe benefits and reportable employer super contributions. Other eligibility conditions apply. IT PAYS TO BE TAX SMART No matter what your situation, age or income, just a little bit of year-end planning can help: • boost your retirement savings, • maximise your government entitlements, and • minimise your tax liabilities. The strategies in Table 2 can help to reduce the tax you pay or allow you to defer payment: Table 2 Tax strategies If you... You may want to... So you can... 1. Gain from a capital loss Have received capital gains from your investments Trigger a capital loss by selling a poorly performing investment that no longer suits your circumstances Use the capital loss to offset your taxable capital gain and save tax Free up money for more suitable investment opportunities 2. Defer asset sales to save tax Are thinking of selling a profitable asset this financial year Defer the sale until a future financial year Defer paying Capital Gains Tax (CGT) Reduce your CGT liability 3. Pre-pay investment loan interest and reduce this year 's tax Have (or are considering establishing) a geared investment portfolio Pre-pay 12 months' interest on your investment loan Bring forward your tax deduction Pay less income tax this financial year 4. Pre-pay income-protection premiums and reduce this year's tax Are employed or self-employed Pre-pay 12 month' income protection insurance premiums Bring forward your tax deduction Pay less income tax this financial year Hopefully, this article has provided you with some year end ideas. Parts of this article have been sourced from articles produced by MLC Limited. MLC Limited have not authorised or issued this article. Michael Lannon is the Executive Director of 2020 DIRECTINVEST, an ADA Partner Service specialising in the provision of execution only DIY investment services. Contact: firstname.lastname@example.org or call 1800 352 021 or visit www.2020directinvest.com.au This article has been prepared without taking account of your objectives, financial situation or needs; and because of that, you should consider the appropriateness of the advice, having regard to the client's objectives, financial situation and needs. investment insight
ADA News Bulletin May 2011
ADA News Bulletin July 2011