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Tips to help keep you one step ahead this EOFY

Posted by Rabobank Australia on

Tips to help keep you one step ahead this EOFY

With the End of Financial Year fast approaching, small, comprehensive tweaks can make a significant impact when it comes to improving financial health. 

Financial Planner and Self-Managed Super Fund Specialist Adviser Liam Shorte of SONAS Wealth believes in the lead up to EOFY, it pays to be informed. 

“People are losing out because they don’t know the opportunities available to them, so read up on what strategies are available, and talk to your tax agent,” he suggests. “We find people still send their information off to their tax agent or accountant blindly, without asking what they should be doing, or the opportunities that are available to them.”

Liam said there were a number of considerations to include in your conversation this EOFY, including the concessional contributions cap, tax cuts, and splitting super.

Concessional contributions cap carry over opportunity

The concessional contributions cap is the maximum amount of before-tax contributions you can contribute to your super each year without contributions being subject to extra tax.

From 1 July 2017 to 30 June 2021, the concessional contribution cap for each year was $25,000.

Since 1 July 2021 the cap has been $27,500, and this will rise to $30,000 on the 1 July 2024.

Liam explains that if you have unused cap amounts from previous years, you may be able to carry them forward to increase your contribution caps in later years.

“Anyone who has significant capital gains or a higher income this year, if their balance is less than $500,000, they may be able to look back and use any of their unused contribution cap for the past five years.”

“It’s called unused carry forward concessional contributions. If your balance is less than $500,000, and you want a tax deduction, you can put more money in on top of the $27, 500 by going into your MyGov account, and go to the tax office service under the superannuation tab where you can find out what your unused carry forwards are.”

He says the non-concessional contributions cap is equally as important to keep an eye on.

The non-concessional contributions cap is the maximum amount of after-tax contributions you can contribute to your super each year without contributions being subject to extra tax.

From 1 July 2024, the non-concessional contributions cap will go from $110,000 per year to $120,000, which Liam explains is after tax money people want to put into super. 

“If you have a large amount you can bring forward to future years, it’s called a three-year print forward rule – so you could put $360,000 in from the first of July, or up until the 30th June you can put $330,000 in.” 

“These are all considerations when it comes to contributions and tax.”

Stage Three Tax Cuts

Recently, the Australian Government has made changes to individual income tax rates and thresholds which will apply to all taxable income earnt from 1 July 2024. 

“People will have some extra money that they can save, and we encourage them to try and save rather than just spend it.”

“To maximise these savings, clients can explore different savings products such as the range provided by Rabobank Online Savings to help grow their extra money"

He encouraged people to educate themselves on the new tax rates, which he describes as ‘fairly generous for all tax brackets’, and how that may impact household finances.

There will be a reduction of the 19 percent tax rate to16 percent, the 32.5 percent tax rate to 30 percent and an increase in the 37 percent tax threshold from $120,000 to $135,000, plus an increase in the 45 percent tax threshold from $180,000 to $190,000.

“These changes will deliver a tax cut to every Australian taxpayer and means that you will pay less tax each payday and keep more of what you earn.”

“The tax cuts will also create opportunities for people to take on more hours of work and keep more of what they earn.”

If you are an Australian taxpayer, you are entitled to the tax-free threshold of $18,200, meaning you can earn up to $18,200 each year without paying tax.

Splitting super for financial gain

Where a couple has an uneven distribution of income, or a significant age difference, Liam explained the advantages of splitting super. 

“If you have a couple where one is on a higher income, and one is on a lower income, look at splitting the super from the higher income person’s account to the lower balance account.”

“A common example is when one spouse has taken time off work to bring up children, and the spouse who has the higher income at the end of each year can ask their super fund to split their contributions to their partner – and it’s still possible to do that for the 2023 contributions anytime up until June 30.”

“This is a really good way of evening out the balances of a couple’s account, and it could help the higher income person stay below the $500,000 cap so they can use more of the tax advantages going forward.” 

Splitting super is also a good way to take advantage of a couple’s age difference. 

“If one person is five or six years older, we can build up their super and get them into pension phase earlier than the lower aged partner.” 

“Then when they get to 67 we do the opposite, we take some money out of the higher aged person’s super and put it into the lower aged person’s super if they are going to apply for an aged pension.”

Encouraging saving for low income earners

If your income is reasonably low, less than $40,000, people can put $1,000 of their own savings into super, and they will receive a government co-contribution of up to $500.

“This is a really good bonus if you only have a small amount available.”

A spouse contribution is another helpful initiative to build the super of a partner not working full time, or on a low income, and adding to the family wealth.

“If you have a spouse who is not working, or working part time, the person who is working and has a higher income can make a contribution of up to $3,000 into the super of their partner, who can then claim that as a spouse contribution and get a tax offset of up to $514 per year.”  

For those on a pension income stream through their super, Liam says its pertinent to remember that minimum pensions are back to the normal standards which is up to 65 years-old, four percent, 65 to 75 years-old, five percent, and up from there.  

“People need to be sure they’re taking the minimum pensions.”

Confirming Superannuation nominations 

Liam said it was important that everyone knew their superannuation fund nominations – do they have a binding nomination to their spouse or estate? Do they know exactly where they want their money to go to and does their super fund have those instructions? 

“Is it a nomination, or is it up to the trustees of the superfund to make the final decision? Or people can put some certainty in place through a binding death benefit nomination whereby they leave decisions to their children or spouse or send it to their estate to be delt with in their will.”

“It does not automatically go to the will, you have to give instructions for that to happen.”

Mitigating Capital Gains Tax

Coming up to the EOFY, Liam said it was important to review the capital gains tax on any of your personal investments, and see if it’s time to wind out of any of those investments.

“If you have a capital gain, now’s the time to look at using those concessional contributions to reduce the tax payable.”

“For example if you have a $20,000 capital gain, you can put some money into super to offset some of that gain.”

Managing insurance woes

The large increase in insurance contributions is also something that Liam believes demands attention. 

“It’s wise to review any insurances through your superannuation, there have been large increases in insurance premiums over recent years, and you’ll really want to know whether or not the premiums have gotten to the extent that they’re depleting your superannuation.”

“If they’re eating up your contributions and more, if you’re going backwards, then you may want to consider moving some of your cover outside of super, or reducing cover to actually match your current needs.” 

“Insurance should never be set-and-forget, you should always review it, especially during times where premiums are going up in double digits.”

Prepay deductable expenses

Liam suggested investigating whether you can get any discounts for paying expenses up front, before the EOFY.

“Because most people will pay less tax in 2024-25 it may be advantageous to pay any expenses that are tax deductible before 30 June to bring forward deductions to the current financial year.”

“This can include things such as fixed-rate loans, subscriptions, insurance premiums, interest on investment loans or professional membership fees.”

Be organised when it comes to Self-Managed Super Funds 

If Self-Managed Super Fund clients would like to prepare for EOFY and want to move any shares into their super fund in an off-market share transfer, Liam warns they need to be organised. 

“You really need to be doing this early in June, as it takes a while for the share registry or broker to move the shares.”

“Also, with SMSF, if you’re taking a pension out that’s above the minimum, consider treating the minimum as the pension – and anything above that as a lump sum commutation, which will help control the transfer balance cap.”  

He says you’ll also need to be aware that the ATO is also asking for a lot more information when it comes to the valuation of properties, as the new division 296 tax on 1 July 2025 approaches, and there will be a lot more scrutiny on property valuations inside SMSF.

“They want to make sure people aren’t over or under valuing properties just to try and play the system, and have issued guidelines already that they will be clamping down on this.”

He also suggested for anyone who has a loan through their SMSF, to check their terms.

“There’s a fixed rate the government has put in place that you must charge, which is currently 8.85 percent, so if you’ve had a loan running on a fixed-rate for the first few years, you need to really check that you’re being charged the correct interest rate going forward.”   

For SMSF Trustees, you also need to be aware that you’re now subject to quarterly total transfer balance account report, prior it was annually for people with a balance less than $1,000,000 but now it’s for everyone quarterly – so you may need to be talking to your SMSF accountant or administrator once every quarter.

Decrease debt between 60 and 65

As people approach 60, he says understanding you can use the system to maximise your tax deductions, and after 60 you can access the money either through transition retirement pension or a full account based pension.

“We’re finding that people still have a fair amount of debt coming up to 60 years of age, so the tax effective way of managing that is to do the concessional contributions to super, and then after 60 take some money out tax free to pay down those loans, it’s a great way of getting the benefit of tax deductions and getting your debt down before 65 – we really want people to be debt free before retirement.”

Liam said his main tip for everyone leading in to EOFY is to talk to your trusted advisor.    

“If you have a planner, talk to them about what they can do before June 30 to improve your position, and how you should be set up for July 1 2024.”

“All these things may seem like small amounts but when you add them up over the years, compounding they make a significant difference to what you take into retirement tax free.”


Disclaimer: Rabobank Australia Limited ABN 50 001 621 129 AFSL 234 700 (‘Rabobank’) is the issuer of Rabobank Online Savings High Interest Savings Account, Notice Saver Account and Premium Saver Account. The information published is of a general nature only and does not take into account your personal objectives, financial situation or needs. Consider the relevant terms and conditions, product disclosure statement and target market determination (all available at www.rabobank.com.au, at Rabobank branches, or by calling 1300 30 30 33), and seek professional advice before making any financial or tax decisions. No representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any information or opinions contained within the publication. You should make your own inquiries regarding the contents of this publication. Rabobank does not accept any liability for any loss or damage arising out of any error or omission in the publication or arising out of any reliance or use of this publication or its contents or otherwise arising in connection therewith.