Year End Matters: Individuals
The tax year ends on 30 June and this year is no different to any other in areas that may be of interest for those who are considering year end planning matters. Generally, better results are generated when these planning matters are incorporated into an overall plan for family matters and affairs, including estate planning.
For those of you who prefer a less structured approach or have funds committed elsewhere, the following thoughts may be of interest, either together or on a stand alone basis:
The benefits of making your maximum concessional superannuation contributions are evident. The savings when compared to the top marginal rate range between 31.5% and 16.5% depending on whether you earn more than $300,000. Over and above this initial savings is the fact that the funds inside your superfund then continue to grow on a concessionally taxed basis of 15% until you pull them out tax free!
Ensure that you are making your donations to deductible gift recipients and that you have the paperwork to support your deductions. Depending on your income levels, it may be more beneficial to defer your donations to the following year (see below).
Prepaying interest for the following year on investment properties or other investments is an effective way of accelerating a tax deduction, however, the flow on impact of this means that the pull forward needs to occur next year otherwise the benefit is lost. Consideration should be given to whether you want to employ this approach in this year (see below).
For those with family trusts, it is important to remember that trustees must comply with the respective trust deeds when appointing income and any capital gains to the beneficiaries. This generally means having a meeting on or before 30 June, however, the trustee should consult the trust deed and their advisers before making any resolutions.
Subject to the budget being passed by the Senate, as I am sure you are all aware, the top marginal rate of tax is set to increase by 2% as a result of the Temporary Budget Repair levy, which, when combined with the Medicare levy increase by 0.5% results in an effective top marginal rate of 49% for those earning over $180,000.
Accordingly, if you are close to the threshold, you may wish to adopt one or all of the above strategies in the current and next 3 years depending on your circumstances. We are of course still waiting to see if the Senate passes the Temporary Budget Repaid levy and whether it gets passed in its current form.
Should you wish to discuss how any of the above, may be applicable to you please contact your relevant ESV engagement partner on 9283 1666.
Article by David Prichard