As the end of financial year approaches, it’s time to consider how to optimise your tax position in a changing world as Australia learns to live with COVID-19 and a new Government.
To help streamline the process and iron out your tax woes, award-winning financial adviser and founder of Brisbane’s VISIS Private Wealth Chris Smith shares his top five areas he recommends reviewing prior to the end of financial year to optimise your tax position.
Concessional super contributions
One of the most popular strategies to assist in reducing personal tax is to undertake concessional contributions to superannuation. Concessional contributions include amounts you personally contribute and claim a deduction for, along with employer super guarantee.
For this current financial year, the limit is $27,500 per person, so depending on your employer super guarantee you might have scope to personally contribute and claim this deduction in your return. Just remember to submit a Notice of Intent to Claim a Deduction form to your fund so they take the appropriate tax out of your fund (15%).
A lesser-known trick about concessional contributions is that if your total super balance is less than $500,000 at the end of the previous financial year, you can carry forward unused concessional contributions. The amount you can carry forward will depend on the amount you have contributed in the previous five years, starting from FY2018-19.
This can be particularly beneficial in years where a large capital gain event arises, such as the sale of an investment property. Refer to the following ATO page to calculate if you can carry forward previous contributions: https://bit.ly/3wKGhtH
Non-concessional super contributions
If you’re closer to retirement age and working towards maximising your super balance, you may want to consider making a non-concessional contribution to super. While there’s no tax deduction available for this type of contribution, the limit is reset annually (currently $110,000) so if you’re aiming to transition a significant amount of capital into super, it might be best to start this side of the financial year.
You can also bring-forward two future years’ worth of limits, which is a great option to move capital into super and start growing your wealth in the tax effective super environment.
Capital Gains Assessment
Have you realised any capital gains throughout the financial year? It might be time to revisit your portfolio’s position and consider selling any investments in loss which can assist in offsetting your gains. Depending on the asset, you may be able to sell and repurchase – this allows you to continue holding the investment if you anticipate a recovery in value while still utilising the loss to your advantage.
Consider your tax deductions for the year and check if there is anything you can bring forward from the next year. For example, you could make a lump sum donation instead of recurring donations if you planned to make these during the next financial year. If you own an investment property, you might consider attending to any maintenance this side of the financial year or pre-paying for certain expenses such as the interest on your loan.
Read more about the ATO’s guidance on deductible rental expenses and which expenses you can pre-pay here: https://bit.ly/3sXNtkV
Government Super Co-Contribution
If you’re a low- or middle-income earner, you might be eligible for up to $500 in super contributions from the government. Provided you meet the eligibility criteria, you’ll receive the maximum amount for your income band after making a $1,000 contribution to your super fund.
Read more from the ATO to determine if you are eligible here: https://bit.ly/3NycGu1.
For further tips and advice, please refer to the below articles:
Top tax tips for 2022 – Morrows, 2022
Top tax return tips for Australians who worked from home during coronavirus – The Guardian, 2020