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Don’t miss out: tax planning opportunities prior to 30 June
Now is the time to speak to your financial planner about how they can help you reach your financial goal by working through your financial and taxation strategies.
This article will discuss some of the approaches you can take to manage your tax affairs.
Pre-pay tax deductible expenses
The 12 month rule allows you to bring forward claimable tax deductions if they are paid by 30 June. This helps you if you have surplus cash around the end of the financial year and can pay these expenses. Some examples of expenses you can pre-pay include:
§ investment gearing interest costs (but note it may not be available under the lending institutions loan terms)
§ expenses such as annual income protection premiums or work related expenses.
Avoid the Medicare levy surcharge
The Government made significant changes to the Medicare levy surcharge and the private health rebate from 1 July 2012. If you are currently paying the Medicare levy surcharge and want to beat the tax man, you can take out private health insurance pre 30 June to avoid paying the surcharge again for next financial year onwards.
Even though you might have private health insurance, you may find based on your circumstances and income, your private health rebate has reduced this financial year ending 30 June 2014. For more information, contact your health fund.
Delay any income
Thinking of selling off a profitable asset, such as shares or property? It may be worth deferring the sale until after 30 June 2014. In doing so, you will delay incurring capital gains tax (CGT) for another financial year. So while you will still need to pay the CGT eventually, freeing up short-term cash flow may be beneficial depending on your circumstances. Please note that if your defer income to the new financial year, you should be conscious that the Medicare levy will be increasing from 1.5 per cent to 2 per cent from 1 July 2014.
Maximise tax deductions
It is important that you retain tax receipts for expenses as they may be tax deductible. Working with your tax agent and accountant can assist you in the process of maximising your available tax deductions.
Note: You should retain copies of your annual investment statements for fees that may be deductible (such as ongoing adviser fees). For more information on what adviser fees may be tax deductible please speak to your financial adviser, tax agent or accountant.
Defer capital gain events or utilise capital losses
You may be able to restructure your investment (non-super) portfolio prior to 30 June this year. If you have unrealised capital losses you could realise the assets during this portfolio restructure.
If you have no capital losses you could defer the realisation of an asset to the next financial year to defer the tax liability. It may also be beneficial to realise an asset after it has been held for at least 12 months to access the capital gain tax discount (except if the asset is held by a company).
Speak to your financial adviser, tax agent or accountant for more information, as this is a complex area of advice.
Personal concessional contributions
Self-employed, non-working and retirees may find themselves in a situation where they can significantly boost their retirement savings, as well as reducing their taxable income by making a personal deductible contribution.
The caps allow deductible contributions which are currently limited to $25,000 per person per year. If you were 59 or over on 30 June 2013, this cap increased to $35,000. Note: If you are self-employed, non-working and retired, you need to ensure that you will satisfy the eligibility criteria to claim a tax deduction for your contribution into superannuation and be you make your contribution into super before Monday 30 June 2014.
Utilise the medical expense tax offset for out of pocket medical expenses
From 1 July 2013, those taxpayers who received the offset in their 2012–13 income tax assessment will continue to be eligible for the offset for the 2013–14 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold. Similarly, those who receive the tax offset in their 2013–14 income tax assessment will continue to be eligible for the offset in 2014–15.
The changes mentioned above will not apply to all taxpayers – the offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.
Your Medicare financial tax statement will help you claim the offset in your tax return. The statement shows you how much you have paid for medical expenses and how much you have claimed back from Medicare.
Get your Government co-contribution
If you earn less than $33,516 (including reportable fringe benefits) and make an after tax contribution to super of $1,000, you will be eligible for the maximum super co-contribution of $500 from the Government. The co-contribution amount reduces by 3.33 cents for every dollar of income over $33,516 and phases out completely once you earn $48,516. If you are eligible, simply make a personal non-concessional contribution into your super before 30 June and the Government will match that contribution.
Self-employed contributors may also be eligible for the Government co-contribution until age 71. Just remember that you need to have personal non-concessional contribution in your account that you have not claimed as a tax deduction.
Your relationship with your financial adviser is vital in reaching your long term financial objectives and they can support you in your end of financial year planning. To find out more information, please speak to your financial adviser.
[Insert adviser’s own General Advice Warning and Disclaimer as applicable]
This information has beenprepared by IOOF Investment Management Limited (IIML), ABN 53 006 695 021, AFS Licence No. 230524, Australian Executor Trustees Limited (AET) ABN 84 007 869 794, AFSL 240023 and IOOF Ltd ABN 21 087 649 625, AFSL 230522. IIML, AET and IOOF Ltd are members of the IOOF group of companies consisting of IOOF Holdings Ltd, ABN 49 100 103 722, and its related bodies corporate.
This is general advice only and does not take into consideration your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser. This presentation is believed to be correct at the time of publication, however to the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on the information it contains. Neither IIML nor IOOF Ltd are registered Tax Agents. You should consider the appropriateness of this information having regard to your individual situation and seek taxation advice from a registered tax agent before making any decision based on the content of this flyer.