2015/2016 End of Financial Year Strategy Ideas
With the end of financial year fast approaching, there are a number of strategies you may wish to consider in
order to reduce your tax position. After all, paying less tax means more money is available to retire debt,
increase investments, or improve your lifestyle.
General Advice Warning: The following strategy ideas may not be suitable for you because they contain
general advice that has not been tailored to your individual personal circumstances. Please seek personal
financial or taxation advice prior to acting on this information.
Strategy 1 – Move assets in your own name to super
If you currently hold an investment in your own name, you may want to cash it out and use the money to
make a personal after tax super contribution. By using this strategy you could reduce tax on investment
earnings and increase your retirement savings.
Please note:
Transferring ownership of investments may trigger a capital gains tax event.
The 2016 Federal Budget announced a lifetime cap of $500,000 for non-concessional contributions.
If legislated, this is a very disappointing policy development
Strategy 2 - Top-up your super with help from the Government
If you or your spouse earns less than $50,4541 p.a. (of which at least 10% is from eligible employment or
carrying on a business) and you meet certain other conditions, you may want to make a personal after tax
contribution of $1,000 to super before 30 June 2016. By using this strategy, you should qualify for a
Government co-contribution of up to $500 to your superannuation fund.
Strategy 3 – Make a superannuation contribution for your spouse and save tax
If your spouse earns a low income (up to $13,8001), you should consider making super contributions on their
behalf from your after-tax pay or savings. By using this strategy before 30 June 2016, you may receive a tax
offset of up to $540 this financial year and increase your spouse’s retirement savings.
Please note:
The 2016 Federal Budget announced an increase in the threshold from $13,800 to $37,000 from 1
July 2017 which is a welcome development if legislated.
Strategy 4 – Make personal deductible super contributions
If you earn less than 10% of your income1 from eligible employment (e.g. you are self-employed or not
employed), you should consider making personal deductible super contributions before 30 June 2016. By
using this strategy, you may pay less income tax this financial year. If you own a business, this strategy may
also help you to build and protect wealth outside your business.
Please note:
The 2016 Federal Budget announced a removal of the 10% requirement from 1 July 2017 which is a
welcome development if legislated and significantly reduces the complexity around this strategy
option.
1
Includes assessable income plus reportable fringe benefits plus reportable employer super contributions (e.g. salary sacrifice).
Strategy 5 – Contribute to super and offset capital gains tax
If you make a capital gain on the sale of an asset this financial year, you should consider making a personal
deductible contribution into super before 30 June 2016. If eligible (generally only available if you earn less
than 10% of your assessable income, reportable fringe benefits and reportable employer super contributions
from eligible employment), this strategy may enable you to save on capital gains tax (CGT) this financial year
and increase your retirement savings.
Please note that contribution caps apply to superannuation contributions. The specific cap which applies
depends on a number of factors including your age and whether or not the contribution is concessional (e.g.
salary sacrificed or tax deductible) or non-concessional (post tax).
Strategy 6 – Purchase Life & TPD insurance tax effectively
If you take out Life and Total & Permanent Disability Insurance through a super fund (rather than a separate
personal policy outside of super) you may be able to save on premiums and/or purchase more insurance
cover (depending on the contribution method).
Please note that depending on your circumstances it may be more appropriate to own Life & TPD policies
personally. Please seek personal financial advice to confirm your position.
Strategy 7 – Delay withdrawing super benefits to save lump sum tax
If you’re under age 60 and want to cash-out some of your super, you should consider deferring your
withdrawal until you turn age 60. By using this strategy, you could save lump sum tax2 and maximise your
retirement savings.
Strategy 8 – Use capital losses to reduce capital gains tax
You should consider selling poor performing assets that no longer suit your circumstances before 30 June
2016. By using this strategy, you could free up money for more suitable investment opportunities and use
the capital loss to reduce CGT3.
Strategy 9 - Defer asset sales to manage capital gains tax.
If you need to sell a profitable asset, you should consider delaying the sale until after 30 June 2016. By
implementing this strategy, you can defer paying CGT. If you hold the investment for over 12 months, you
may also reduce your CGT liability.
Strategy 10 – Pre-pay investment expenses
Borrowing to invest (gearing) can help you achieve your long-term lifestyle and financial goals. However, if
you’ve already commenced a gearing strategy (or you are about to set one up), then prepaying the interest
bill for up to 12 months before 30 June 2016 may enable you to bring forward your tax deduction and reduce
your taxable income this financial year.
Similarly you could consider pre-paying other investment expenses in advance. For example, financial
planning fees, accounting fees, property management fees, insurances relating to investment properties
(building and tenants cover) etc.
Strategy 11 – Take up Private Health Insurance
Did you know that singles earning more than $90,0001 or couples with a combined income over $180,0001,
for 2015/2016, without health insurance, could pay an extra 1.0% - 1.5% tax via the Medicare Levy
Surcharge? Whilst it is too late to avoid the Medicare Levy Surcharge for this financial year, by taking up
private health insurance now, the levy can be avoided in 2016/2017.
2
Assumes the benefit is paid from a taxed super fund (and satisfy a condition of release). Untaxed super funds such as the CSS & PSS funds
are taxed under a different regime.
3 Capital losses can only be offset against capital gains. If you don’t make a capital gain in a particular financial year, the capital loss may be
carried forward to future years.
Furthermore, people without health insurance before 1 July following their 31st birthday, could pay an extra
2% on top of the premium when they do join for every year after the age of 30 years they're without cover.
Other Considerations
Increase to Concessional Contributions cap – for those who have reached age 49 during the 2015/2016
financial year, the concessional contributions cap (i.e. Employer contributions including Superannuation
Guarantee and Salary Sacrifice) will increase from $30,000 to $35,000 from 1 July 2016.
Please Note:
The 2016 Federal Budget announced a reduction to the concessional contribution cap from 1 July
2017 for all age groups to $25,000. If legislated, this means those individuals aged 50+ will only
have access to the higher limit of $35,000 in 2015/2016 and 2016/2017. This is a very disappointing
policy development.
Preservation Age - Superannuation benefits are generally preserved until a condition of release is met
(generally permanent retirement from the workforce upon reaching preservation age). The minimum
preservation age has until now been 55 but from 1 July 2015, this preservation age is gradually being
increased from 55 to 60.
This means that from 1 July, anyone turning 56 during the 2016/2017 financial year will have reached their
preservation age and have the ability to:
Commence a Transition to Retirement (TTR) Strategy
Have unrestricted access to their superannuation benefit if retired permanently from the workforce.
Please Note:
The 2016 Federal Budget announced that earnings and income within a TTR pension for individuals
that have reached preservation age but are not yet 60 will be taxed at up to 15% (currently nil) from
1 July 2017. If legislated, this means affected individuals will need to review their TTR strategy to
ensure it remains beneficial from 1 July 2017. This is a very disappointing policy development.
Do you require more information?
For more information on how these strategies may be of benefit to your individual situation, please speak to
your Financial Adviser.
Disclaimer: Unless otherwise indicated, the information in this newsletter is provided by Tilea Wealth Pty Ltd ABN 92 034 065 376, Authorised
Representative of Consultum Financial Advisers Pty Ltd AFSL 230323. This information has been prepared without taking into account of the investment
objectives, financial situation, tax position or particular needs of any individual person. Because of this you should, before acting on it, consider its
appropriateness, having regard to your objectives, financial situation and needs. You should obtain a copy of the Product Disclosure Statement before
making any decisions about any product. Reasonable care has been taken to ensure that information in this newsletter is derived from sources believed to
be accurate, and that examples are fair and reasonable. However, it should not be considered a comprehensive statement on any matter nor relied upon as
such and Tilea Wealth Pty Ltd does not guarantee the accuracy or completeness of the information. Any taxation position described is a general statement
and should only be used as a guide. It does not constitute tax advice and is based on current laws and their interpretation. We recommended that you
speak with a Financial Adviser to review your individual situation. This document was produced in May 2016. © Copyright 2016.