Financial health has never been so important for families.
With a young family myself, I certainly understand the stresses that come from balancing family, work-life and financial wellbeing. With EOFY on the horizon, this deadline often acts as a catalyst for many to review their finances.
With over 20 years’ experience in the financial advice industry – my advice is that there’s more to be gained from effectively using the tax system to help reach your family’s financial goals, whether saving to buy a property, early retirement or paying off debts.
However, before I move ahead, I should clarify, what I’m talking about is legal tax planning (not tax avoidance or evasion). In the ATO’s own words, ‘Tax Planning’ is an Australian taxpayer’s right to arrange their financial affairs to keep their tax to a minimum. When organising their affairs, individuals must ensure they do so legitimately, and within legal grounds.
Considerations coming into June to maximise your family’s financial fitness
1. Super is super
Minimise your tax liability by investing as much as you can afford into your super. Concessional super contributions are capped at$25,000 pa (going up to $27,500 in July), which means you can voluntarily contribute over and above your employers’ contributions, to your $25,000 threshold.
Whilst putting this much money away may seem painful, particularly if you are at the younger end of the spectrum, it will reduce your tax liability.
1. Make sure you check existing contributions, as you may be penalised if you go over the $25,000 threshold.
2. Decide how much you want to top-up your contributions and ensure this is received by the super fund before the end of the financial year and ensure you or your adviser lodges the appropriate form with your super fund to claim a tax deduction on your contribution.
2. Super keeps giving
Let’s be honest, the pandemic has left many reducing spending and saving more for a rainy day. If you decided to reduce your super contributions last year and are now having regrets, you may be able to access the ‘carry forward cap’. This may also be a consideration if you’re one of the fortunate ones who have reached their $25,000 concessional cap this year.
From 1 July 2018, if you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts. Unused amounts are available for a maximum of five years, and after this period they will expire.
3. Financial wellness comes from looking ahead
While there are numerous end of financial year planning strategies available (depending on your individual circumstances), there are equally as many important considerations to factor into your planning for the next financial year. For the best results, you’ll need to be proactive and plan for 2022 and beyond.
If you haven’t done so already, speak with your Accountant about your tax liability and get ready for the inevitable – consider your capital gains, reviewing your investment debt and forecasting your future tax liability to ensure you don’t suffer from ATO bill shock!!
4. Look at your big picture for your financial health.
It’s important to effectively integrate your wealth, accounting, and tax advice to ensure you maximise the advice offered. We often find new clients have an accountant and are well versed in their ability to deduct these costs. However, all too often new clients do not appreciate they can also claim costs associated with financial advice too, such as your ongoing financial advice fees and income protection insurance cover held in your name.
Start as you mean to go on. Begin getting documents together, reach out to your accountant and financial adviser to kick off 2021 proactively managing your financial health.
We’re suggesting to clients that they start getting paperwork ready now. Income Statements or Payment Summaries for any jobs you have had over the last year (these can now be found through myGov for most people).
Bank interest statements setting out amounts of bank interest received.
Pensions or Government payments.
Financial Adviser invoices.
Superannuation lump sum payments.
Allowances (Car, travel, entertainment, meals etc.).
Employee share schemes.