End of tax year planning
To those of you in Melbourne, welcome to the first day of freedom again. Hopefully, this will be the last time you have to go through a lockdown.
I’ve just booked in for my vaccination in a couple of weeks – if you’ve over 40 nationwide, you can now book an appointment. New appointments seem to appear first thing, I checked a few times last night and there was nothing but at 7am this morning I logged in and there was plenty.
The end of financial year is approaching, so I thought it would be useful with this fortnights letter to summarise some of the main planning strategies for us to consider heading into 2021/22 TY.
Pre-retirees
Maximise tax deductable Super contributions.
If your employer contributions and your own salary sacrifice contributions total less than $25,000, you can make additional contributions from cash savings and claim a reduction on your tax.
Contact me if you’d like to do this and I’ll help arrange.
Check employer contributions for next year
Next year the Super Guarantee rises from 9.5% to 10%. The amount you can put in before tax rises from $25,000 to $27,500.
If you’re fortunate enough to have the maximum paid by your employer (or if you own your company) you should check that you will be given the new higher contribution next year.
Pay for any deductable expenses now
If there’s an education course for your job that you’d like to do, equipment you’ll need for your business etc. you may wish to pay for these now, to claim a deduction on this years tax.
Check what is deductable in relation to your own role with an accountant – but don’t use it as an excuse to upgrade your iPhone if you don’t need it! Buying something you don’t need just to claim a deduction only fills the pockets of Harvey Norman – and they’ve had enough tax payer cash.
Tax harvest losses
Shares that you own outside super, that are running at a loss to purchase price can be sold, with the loss carried forward against future gains. Take care though – if you sell a share and then repurchase it in a short time frame, then the ATO may penalise you.
You can buy a similar share with the proceeds however – ie. Sell Commbank to buy Westpac etc. but generally I would aim for something more diversified than a single company.
Post-retirees
Extension of lower minimum withdrawals
Surprisingly, the Government has extended its reduction in the minimum required annual withdrawal from any tax free pension accounts.
As I have spoken to many of you about this year, best practice is to take the minimum from your pension where possible and top up with other funds if required. If you have other funds to support you for the whole year, we can also consider pushing the minimum payment until the end of the tax year – leaving your savings in a tax free wrapper for as long as possible.
Abolishment of the work test
The abolishment of the work test is a big win for retirees. Those of you retired and under 75, can now continue to make contributions to your Supers, without having to pass an activity test, showing you’d worked 40 hours within a 30 day period.
This means that if the pension payment you take (or are mandated to take) is more than you need for the year, it can be contributed back into your Supers.
As ever, take advice on your own circumstances before acting on any of the above.
