End of financial year strategies

June 30 is fast approaching but there’s still time to consider the strategies available to you to build your wealth. Below are simple tips that could help maximise what you’ve got this financial year.

1. Pay interest in advance

Borrowing to invest may be a tax-effective means of wealth accumulation. This type of strategy lets you purchase property, shares, or any other asset that generates assessable income, bring forward next year’s interest cost, and claim a tax deduction for those costs this financial year.

2. Make a concessional contribution to super

If you are self-employed, or earning less than 10 per cent of your income from an employer, you can generally claim a tax deduction for personal super contributions up to $30,000 if you are under age 50 and $35,000 if 50 or older. As from 1 July 2017 all individuals under age 75* will be able to claim an income tax deduction up to a maximum of $25,000.

*individuals aged between 65 and 74 can only make a contribution if they are gainfully employed.

3.  Government co-contribution

To be eligible to receive the co-contribution, if you earn less than $51,021 and make after tax contributions, you could qualify.

If you earn less than $36,021 and make after tax contributions to super of $1,000, you could be eligible for the maximum co-contribution of $500. This amount reduces by 3.333 cents for every dollar of income over $36,021 and phases out completely once you earn $51,021

4. Protect your income and save on tax

Income protection insurance can pay a monthly benefit of up to 75 per cent of your salary if you are unable to work due to illness or injury, with the premiums being tax deductible. Paying premiums in advance enables you to bring forward the following financial year’s premiums to claim a tax deduction this financial year.

After July 1, consider the following:

  1. Have your key financial goals changed? Our lives are not constant and our goals and can change greatly from year to year. Major life events such as serious illness, the birth of a child, or the death of a parent or spouse can all result in significant changes to our wealth management goals.
  2. Salary sacrifice arrangements - Have you reviewed your salary sacrifice arrangements to ensure you do not exceed the reduced maximum of $25,000 per annum from 1 July 2017.
  3. Prioritise your goals - It’s important to be realistic about how soon you can accomplish your financial objectives. For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term. Paying off your mortgage and providing for retirement are long-term goals.
  4. Be investment savvy - Make sure that your investments support your appetite for risk and your objectives. A tailored analysis will address your individual risk preferences. Regular portfolio reviews with your adviser are essential to determine any sell-downs or top-ups that would benefit you.
  5. Do you need to change your financial strategy?

Licensed advisers have the tools and knowledge to create projections that take into account changes to your goals, risk level, and the timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

The Government superannuation reforms announced last year have become law and most are set to commence from 1 July 2017. Some of the other key changes that you need to be aware of are:

  • The Non-Concessional Contribution cap will be $100,000 per year, down from $180,000 each year.
  • If your total super balance exceeds $1.6 million, you will not be able to make any non-concessional contributions.
  • Currently earnings on Transition to Retirement Income schemes are tax-free. From 1 July 2017, Investment earnings will be taxed at 15 per cent.

Despite these changes, it must be remembered that superannuation still remains a highly tax-effective saving system. That’s why it’s important you are aware of the changes that are being made and can make informed decisions on how they fit in with your retirement plans.

Speak to your financial adviser to discuss your strategies and plan ahead for the next financial year.

Source: Zurich

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