by Tim Mclaughlan

This time of year, in the weeks leading up to June 30, is like a big game of chess. This is when advisers are working out which moves are going to be the ones for those clients who are hoping to improve their tax position.

This article looks to highlight some of the moves you might want to consider over the coming weeks. If any of these suggestions prompt you to want to learn more, be sure to consult with your Elston adviser.

Are you maximising your super contributions?

In the 2023/24 financial year, super members can make concessional (pre-tax) super contributions totaling up to $27,500. Are you contributing the maximum each financial year, or are you falling short?

If you are employed, you could also consider asking your employer to put extra into super, out of your pre-tax pay, as this can be seen as a better way to save more and pay less tax.

Superannuation members often find that if they talk to an Elston adviser, more opportunities to contribute are identified. For example, if you haven’t maximised your concessional contributions, you may be eligible to make ‘catch-up’ concessional contributions.

Depending on your situation, here are two lesser-known strategies you may want to ask your Elston adviser:

  • Splitting contributions with your spouse – Splitting super contributions can often assist financial security in retirement for couples. Splitting allows you to share superannuation contributions with your spouse (before-tax contributions).
  • Pre-paid investment debt interest – It is sometimes possible to prepay some expenses related to your investments, such as a rental property, and claim an immediate deduction. This might include insurance or interest on money borrowed.

Using downsizing to upsize your super

Is this the year when you finally make the decision to downsize? It may be tempting when you think about the money that could go into your super.

Eligible super members, who are aged 55 or over, can make super contributions of up to $300,000 per person from the sale of their home. That means a couple could add as much as $600,000 in contributions. This could be a significant increase to your super as you approach retirement.

Importantly, these contributions don’t count towards contribution caps and can be made, even if you don’t meet the usual age, work and other contribution tests.

It’s important to get all your ducks in a row, so you can look at maximising this one-off opportunity. So, if this sounds like an opportunity you wish to consider, talk to your Elston adviser well ahead of your move and have a chat about the best way to approach downsizing.

Structuring your giving may be simpler than you think

If you have a big tax event on the horizon, your financial adviser or accountant may be talking to you about looking at how a charitable donation might allow you the opportunity to reduce the impact of that event.

A one-off donation can be seen as a tax effective option, however, there are other options that you might wish to consider. For example, establishing a sub-fund in a public ancillary fund.

The setup of a public ancillary sub-fund is generally quite simple, which means that if you need to get it done before June 30, this can usually happen in less than a week.

You can consider setting up a sub-fund in the Elston Giving Foundation, with as little as $25,000, and even though you may get the tax benefits this financial year, you don’t have to rush into the donation decision right away.

By thinking of a more structured approach to giving, it could be the beginning of a family tradition and the establishment of a legacy that could live on for generations. So, before you make that one-off donation, talk to your Elston adviser.

Could your catch-up contributions offset a capital gain?

If you’re worried about the Capital Gains Tax you could be incurring this financial year, it might be worth talking to your Elston adviser about how some, or all, of that tax could be offset by super contributions. How might that work? If you have a total super balance of less than $500,000 as at 30 June 2022 you qualify for a tax deduction.

Let’s take a look at an example.

In the 2022/23 financial year, Amy has a $50,000 taxable capital gain from selling her rental property. Her employer pays $10,000 per annum into her super. Over the previous three years, she hasn’t personally contributed anything extra. As the cap was $25,000 for two years (FY20 and FY21) and $27,500 last year (FY22), Amy has unused contributions totaling $47,500. This financial year, Amy’s employer will also contribute $10,000, and with the cap at $27,500, this will give her a further $17,500 available to make in contributions.

Therefore, in total, Amy could put up to $65,000 into her super fund and claim it as a tax deduction. This would be more than enough to offset her capital gain.

It should be noted that this catch-up is only available to those who have a total super balance of less than $500,000 as at 30 June 2022. But if you think you might qualify, talk to your Elston adviser.

Can you delay the sale of a big asset a month or two?

Timing the sale of your home or business is an important part of tax planning. Plan well ahead and let your accountant and adviser know that you’re thinking about selling. It’s possible that they’ll be able to advise you on the ramifications of a sale that’s actioned in the current financial year versus the next.

By arming yourself with all the information, before you sign on a sale, you’ll be better prepared to make a more informed decision, and potentially reduce the overall tax burden.

Talk to Elston about preparing for June 30

Talk to your Elston adviser now, before the end of financial year gets too close. We will be able to talk you through the options which could be of benefit to you and we’ll also explain the eligibilities and allowances relevant to your financial situation.

References:

  1. Contribution caps | Australian Taxation Office (ato.gov.au)
  2. Downsizer super contributions | Australian Taxation Office (ato.gov.au)

Note: examples are generic and outcomes differ depending on age, income, assets and other factors, and may not be applicable in all cases.

If you would like more information please call 1300 ELSTON or contact us.