Things to consider as the end of the financial year approaches.
Changes to be aware of…
Increased Tax Savings via Concessional Contributions Before 30 June 2024
Given tax rates across most income brackets will be lower in the next financial year due to Stage 3 tax cuts, making voluntary concessions contributions before June 30 may offer a greater tax benefit. For example, for someone earning $80,000 their marginal tax rate drops from 34.5% to 32% while the tax rate on superannuation remains at 15%, so any contributions made in the current financial year, where their marginal rate is 34.5%, will have greater tax benefits.
Last Opportunity to Utilise Unused Concessional Contributions Cap From 2018/19
Prior to June 30 will be the last chance to utilise the unused Concessional Contributions cap from 2018/19. This may give you the ability to exceed the annual cap ($27,500 for 2023/24) under catch up rules, if your total super balance at 30 June 2023 was less than $500,000 and you had unused contributions from the previous five financial years.
The maximum that can be contributed in 2023/24 under the catch-up rules is $157,500. This assumes no prior Concessional Contributions have been made since 2018/19. This would be the current year annual cap ($27,500) plus the sum of the previous five financial years, but it’s important to know exactly the space available to you. This information should be in your MyGov account.
Higher Contribution Caps Starting July 1, 2024
The annual Contribution Cap increases from $27,500 to $30,000 in 2024/25, bringing the maximum five-year carry-forward Contribution Caps to $162,500.
The Perennial Reminders…
Annual Super Pensions Withdrawal Minimums
In case anyone missed this change for the current financial year, superannuation minimum pension withdrawals were halved during covid and extended through to the end of the 2022/23 financial year. 2023/24 returned to the higher long-term minimums with annual payments calculated based on the account balance at July 1.
SMSF Pension Payment(s)
A further reminder on the previous one, SMSFs may work on a single annual pension payment instead of multiple payments through the year and are often done manually. If this is the case, it’s important to ensure the payment or even the final payment is made before June 30 and that it reaches the minimum threshold for your age bracket above.
Spouse Contributions
You may be eligible for a tax offset up to $540 when making super contributions of up to $3,000 into your spouse’s super account, if your spouse’s income is $37k pa or less in 2023/24. The offset gradually reduces for incomes above $37k pa and phases out above $40k pa. The offset also reduces if the spouse contribution is less than $3,000.
Capital Gains/Losses
It might be time to get the stinker investments off the books before the end of the financial year. Obviously, this is most beneficial if you have gains elsewhere to offset.
And remember no wash sales. The ATO will not look kindly on selling and immediately buying back the next day just to claim a loss. There needs to be a 30-day break before you buy back the same asset and still claim the loss.
Bringing Forward Deductible Expenses
If you have any tax-deductible expenses likely in the coming financial year, you might consider bringing them into this financial year. These include pre-paying investment loan interest, income protection policies and private health insurance, plus any work related subscriptions or memberships.
Maximise gifting thresholds
Assets of up to $10k per financial year (up to $30k in a five-year rolling period) can be gifted before impacting on social security entitlements. Social security clients who want to provide financial assistance to family or friends may be able to contribute $20k in a short space of time by gifting $10k pre June 30 and $10k post July 1.
Timing of Payments
If you are making superannuation contributions, don’t wait until June 30 to take action. Super funds generally advise investors to make BPay payments by June 27 to ensure they make the cut off. Best to assess your options now and make the move before the last week of June arrives.
Final Things to Check at End of Financial Year
Are your beneficiary nominations current?
Have you reviewed your pension payments and are they adequate?
Have you collected your receipts for your tax return?
Do you understand what deductions you can claim?
Are you under or over your super contributions caps?
Most importantly, discuss all strategy options with your adviser.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
