With the end of financial year just over 6 weeks away, we highlight 5 effective EOFY strategies you can implement now to help you reduce tax, save money and build your super nest egg for retirement.
Have an investment property? You’ll need to know what you can claim this financial year. And if you’re self-employed, we help you get organised for 30 June with our 3 EOFY tips.
Finally, if you have an SMSF, we share how to make the most of your super this financial year. But, you’ll have to act fast!
5 effective EOFY strategies to implement now
These 5 EOFY strategies can help you reduce tax, save money and build your super.
1. Increase super contributions: Tax concessions now & more for retirement later
Consider increasing your super contributions, so you can benefit from tax concessions and save more for retirement.
Did you know:
- If you’re employed, you could make super contributions from your pre-tax salary
- If you’re self-employed, you may get a tax deduction for the money you put into super
- If you contribute after-tax pay or savings into super, you may pay less tax on investment earnings, qualify for a super contribution from the government or receive a tax offset.
Be aware of contribution caps, however. If you exceed these limits, you may have to pay additional tax.
2. Prepay interest on investment loans
Prepaying interest on any investment loans before 30 June could help you manage your cashflow more efficiently.
3. Insurance premiums could provide a tax deduction
Take out an income protection policy outside of your super account before 30 June and you could be eligible for a tax deduction this financial year.
4. Offset capital gains tax
Reduce the amount of capital gains tax (CGT) you have to pay by making tax deductible contributions to your super (if you are eligible).
5. Life after work
Maximise your income-generating capability in retirement. Speak to your Westlawn Financial Adviser about how you could structure your financial assets more tax-effectively.
Have an investment property? Know what you can claim
If you have an investment property, you may claim costs you’ve incurred to get tenants into (or out of) your property. This includes the costs of preparing a property for lease such as:
- Rental agreement
- Repairing or maintaining the property
- Travel costs for property inspections (as long as you’re only travelling to inspect the property)
- Costs of having a property agent manage the property, and
- Interest on a loan may be tax deductible if borrowing to buy a rental property (or land to build a rental property on). This is also the case if you take out a loan to renovate or improve your rental property in that financial year.
There are some expenses that you need to claim over a number of years, rather than all in one year.
For example, appliances such as hot water systems, carpets, and heating and cooling systems are depreciating assets, so you need to claim their value as it declines over the years.
You may also be able to deduct capital works expenses, such as the money you spend on construction, generally over 25 to 40 years1.
Claiming on investments can be complex – and tax law does change frequently. So it’s important to seek advice at tax time to be sure you get every claim you’re entitled to. Contact a Westlawn Business Services Accountant for assistance.
Self-employed? 3 things to do before 30 June
If you’re one of the 2 million or so self-employed Australians out there2, you’ll know how time-consuming the end of the financial year can be. So the earlier you get organised, the easier it will be at tax time.
1. Understand what you can claim
As a self-employed person, you can claim expenses that many employees can’t. However, they must be bona fide business expenses – and you’ll need the receipts and paperwork to prove it.
For example, you can claim:
- Petrol – but only for work-related travel, and you’ll need to keep a logbook.
- Travel expenses – but you’ll need receipts, and the trip needs to be genuinely for business (and for more than one day).
2. Top up your super
According to the Australian Super Funds Association (AFSA), in 2012 nearly 25% of self-employed Australians had no super whatsoever3. This could lead many to suffer financial hardship in retirement or the need to work longer to retain a regular income.
So make sure you make contributions yourself. You can contribute up to $30,000 (or $35,000 if you were aged 49 or older from 30 June 2014)4. Remember, if you’re self-employed, you may be able to claim all your super contributions at tax-time – but do it before the end of the financial year.
3. Protect your income (it’s tax effective)
If you work for yourself, you’re not entitled to Workers Compensation. So it’s worth taking out income protection insurance to protect your income from the risk that illness or injury may put you out of action for a while.
Generally, the premiums are tax-deductible, making them more affordable. You may also be able to buy income protection insurance (and life insurance) through your super fund. To find out more, contact Westlawn’s personal insurance specialist, Simon Keir.
Get the most from your SMSF this financial year
Self managed super funds are the fastest growing superannuation vehicle by way of popularity amongst Australians. This is because of their flexibility around investments, tax and estate planning. But as attractive as an SMSF is, it’s imperative that you make the most of your fund by keeping up to date with the latest rules and legislative changes.
Maximise your cap
One way to boost your super savings is by making the most of your contribution cap5 each financial year. If you don’t contribute the maximum amount each financial year, the remainder cannot be carried forward into the next financial year.
If you exceed your concessional contributions cap you may have to pay additional tax. So don’t exceed your concessional contribution cap. Keep in mind that any excess concessional contributions made could be counted towards your non concessional contributions cap.
To find out more, contact Liz Maroney.
1. Australian Tax Office, Guide for Australian Rental Property Owners, 2013.
2. Independent Contractors, Independent Contractors: How Many? (Australia), November 2013 and Australian Bureau of Statistics 6359.0 – Forms of Employment, Australia, November 2013
3. ASIC, Smart Money, Self Employed People, January 2015
4. ATO, Concessional contributions cap, December 2014
5 For the financial year ending 30 June 2015, concessional super contributions are capped at $30,000 pa, for people aged 48 or under on 30/6/14 and $35,000 pa for people aged 49 or over on 30/6/14.
8 May 2015
This document contains general information only Westlawn Wealth Management Pty Ltd ABN 32 124 861 409 is not a registered tax agent. If you wish to rely on this letter to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, Westlawn Wealth Management Pty Ltd did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 20 March 2015.
General Advice Warning
The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial, tax and/or legal advice prior to acting on this information.
Westlawn Wealth Management Pty Ltd ABN 32 124 861 409, Authorised Representatives of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857,