As we approach the end of the financial year, implementing specific strategies to help you achieve your goals and objectives can become time critical. Make sure you’re you don’t miss out on the benefits of the following strategies.
Maximise super contributions
Superannuation can be a tax-effective way you to build your retirement nest egg as investment earnings within the fund are taxed at a maximum rate of 15%. However, the Government has placed rules on how much a person can contribute to super in a financial year. So it is important you take into consideration the thresholds below, the consequence of exceeding the caps can be very costly.
Note: The non-concessional contributions cap will remain at $180,000 in 2016/17, unless changes are legislated as part of this year’s Federal Budget
Contribution splitting is a strategy that can help couples equalise their superannuation benefits. In situations where contributions are split to an older spouse, the strategy may enable superannuation benefits to be accessed sooner. With the new Assets Test rules commencing 1 January 2017, couples can also use this strategy to help reduce Centrelink assessable assets by splitting contributions to a younger spouse. In summary, you can split up to 85% of concessional contributions (up to the concessional contributions cap) where your spouse has not met a condition of release for their super benefits.
Government super co-contributions provide eligible clients with the opportunity to receive up to $500 from the Government to help increase their retirement savings. If eligible, you will not need to apply for the co-contribution. The Australian Taxation Office will automatically calculate the co-contribution and deposit it into their super fund.
Note: For the 2016/17 financial year the maximum co-contribution will remain unchanged at $500 but the income thresholds will increase to $36,021 (from $35,454) and $51,021 (from $50,454).
You can enhance your retirement savings and reduce your tax liability by contributing to your spouse’s super fund. These contributions are non-concessional contributions that you can make on behalf of your spouse. By doing so, you can help build your spouse’s superannuation and may be eligible for a tax offset of 18% on contributions up to $3,000.
Federal budget 2016
The 2016 Federal Budget will be delivered on 3 May 2016. Each year Budget rumours swirl and this year has been no different. Recently reported Budget rumours which could impact the strategies discussed in this article include:
• A reduction to the concessional contributions cap (possibly to as low as $20,000 per annum). With non-concessional contributions based on six times the concessional contributions cap, the non-concessional contributions cap may also see a reduction (to $120,000 per annum if the concessional cap were reduced to $20,000 per annum).
• A reduction to the threshold for division 293 tax (where an additional tax rate of 15% applies to ‘taxable contributions’ for higher income earners) from $300,000 to possibly as low as $180,000.
If you want to learn more about how you can implement some of the above strategies prior to June 30, call us on 4613 0311.
Source: Challenger Life Company Limited , Challenger Tech April 2016, https://www.adviseronlineportal.com.au/CMS/TechnicalUpdates/21498_Tech_Article_April_EOFY.PDF?et_cid=19955627&et_rid=1502021063&linkid=Challenger+Tech+update