How are you positioned for the end of Financial Year? With four weeks left until the end of the 2012 financial year and a raft of changes due to start on the 1st July, we have listed below some tips, reminders and updates to get you ready for June 30.
- The current Government Co-Contribution provides $1 from the government per $1 contributed after-tax by members up to $1,000. This will reduce to $500 from July 1st 2012. Eligible Co-Contributions received up until the 30th June 2012 will be eligible for up to $1,000.
Deductible Superannuation Contributions
- Superannuation Contributions can be tax deductible to employee’s via a salary sacrifice arrangement and to the substantially self-employed. Making additional deductible superannuation contributions (i.e. End of financial year bonus) allows people to manage their taxation liabilities but also provides more buying power for your dollar. Not only can it be more tax effective to put money into superannuation, but earnings within the fund are capped at 15% and capital gains within superannuation can be as low at 10%! The diagram below shows the amount available for each dollar after tax in superannuation versus taken as income for each tax bracket. If you are considering salary sacrificing, an agreement needs to be in place before the contribution is made.
- The Government has also proposed the current $50,000 cap for deductible contributions for people over the age of 50 will reduce to $25,000 from July 1st 2012. This is the last year for the foreseeable future that people over the age of 50 will be able to contribute above $25,000 into superannuation in a financial year.
Taxation in Superannuation
- The government has proposed to increase the contributions tax from 15% to 30% from July 1st for income earners over $300,000.
- Income Protection premiums are generally tax deductible. In addition, Income Protection premiums are not included in the widened scope of income for social security benefits, meaning that unlike negatively geared property or additional superannuation contributions, Income Protection premiums are not ‘added back’ when calculating eligibility for social security benefits and additional tax liabilities (e.g. Medicare Levy Surcharge etc.). Income Protection is an effective and comprehensive way to protect a family’s income in the event of sickness and injury and will provide protection 24/7.
- There are a number of investments available that can be used in a tax effective manner. It is important to seek thoroughly researched investments that have specific ATO product rulings to ensure that and tax concessions available are compliant with relevant taxation laws.
With all end of financial year planning, some general principals apply;
- keep all records,
- pre-pay annual deductible expenses,
- ensure all expenses and pre-paid expenses are paid before June 30th,
- ensure that all superannuation contributions have cleared into your superannuation fund before June 30th.
Lastly, with the flurry of activity leading up to cut-off dates, don’t leave things to the last minute, start preparing now to ensure that you don’t miss out! For any assistance, advice or quotations, feel free to contact me anytime.