The end of the financial year is an important time...
A lot of EOFY planning is similar year on year, but with two key shifting factors to be applied – one being legislation - which is forever changing, and the other being your circumstances.
Markets have been tumultuous in recent months, and I’m aware it has left many of our clients feeling uneasy. Everyone seems to accept that markets go up and go down, but when markets are down we hear more from investors than when markets are up! In behavioural finance terms, we generally value our losses greater than our gains – it’s almost hard-wired into us. We are here to help you make sensible short and long-term decisions, but also ensure you are as comfortable with the journey as possible.
Some of the points I’ve listed below might be what it takes to prompt you to reach out to us for guidance or if you have any questions.
Key areas to consider at this time might include:
- maximising super contributions without exceeding the relevant caps – which bears consideration of both concessional (or pre-tax) contributions and non-concessional (or after tax) contributions. There’s relatively new opportunity for some to use catch up concessional contributions so long as your total super balance is under $500,000 and there’s now more flexibility on how to make contributions concessional via Personal Deductible Contributions too, so this may be enormously beneficial to save you personal tax and boost your super at the same time.
There’s potentially a free hit of up to $500 for those earning under about $41,000 per year, and a tax offset of up to $540 if your spouse earns under about $40,000. Who doesn’t like free money or tax savings?
The end of Financial year falls on a Thursday, and we recommend any contributions you wish to make are done by no later than Friday the 24th of June 20222! That’s only 11 business days away.
- bringing forward deductible expenses – this includes things like income protection policies, interest on investment loans and super payments your business has to pay anyway. Bringing deductions forward helps with the ‘bird in hand factor’ – money today is worth more than money tomorrow.
- deferring taxable income – essentially this makes sense if you can reduce how much tax you can pay by earning income over two tax years instead of in one. You’d need to be sure it doesn’t amplify a ‘next year income tax problem,’ as well as considering the value of money in hand.
- managing capital gains – a lot of this also hinges in timing. Some of our clients choose to sell investments the year after they retire, or in a year their taxable income is lower due to maternity leave, or missed employment income from a global pandemic…
- managing pension minimums – for many of our retiree or income stream clients, the last couple of financial years have had changes that halve your minimum pension percentage draw requirement, so if it was 6% it’s now 3%, for this, and next financial year. This may mean that if you don’t need the income to live comfortably, we can reduce the impact to your retirement funds by selling less invested assets while the market is deflated. Simply put, with low prices you need to sell more units to generate the same cash.
If these points make you want to talk with us, please call the office on 07 5335 8000.
