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Winning the game in the last quarter - Big Sky Financial Planning

Winning the game in the last quarter



It’s April again, the second month of autumn and the first month of the winter sports season. It’s a time to dig out those scarves and beanies and join fans in arenas around the country.
Even if you’re not into sport, April is also a good time to dig out some other things from wherever you last filed them. With the last quarter of the financial year about to start, it’s time to get out your financial paperwork. Getting organised now could mean the difference between ‘winning’ and ‘losing’ during 2010/11.

There are three key issues to think about as the new financial year approaches – opportunities to realise tax benefits, opportunities through investments or government initiatives, and ensuring you don’t exceed the superannuation contribution caps.

Tax benefits



It’s important to start early to maximise any tax benefits you’re eligible for in 2011/12. Tax benefits shouldn’t be regarded as the main reason for financial decisions - tax advantages are just a bonus. Finishing ahead on the investment scoreboard is the main game and this should be your long term aim.

Salary sacrificing into super


Contributing to your super via salary sacrifice reduces your assessable income, which then reduces the amount of income tax payable. Because the contributed amount is only taxed at 15%, not your marginal tax rate, a larger sum is able to grow in your super.

Superannuation spouse contributions

If you meet the eligibility criteria, you’ll be entitled to claim a tax offset for contributing to your spouse’s super. This way your spouse’s super benefit get a boost, and you’ll be in line for a reduction in tax payable.

Insurance premiums

Income protection insurance not only protects you against loss of income should you be ill or injured for a long time; the premiums are tax deductible too. If you haven’t got this kind of cover, see your adviser and set this up before 30 June to ensure you maximise that deduction in 2011/12.

Other initiatives or investments



Super co-contributions

Under the government’s co-contribution scheme, if you make a personal after-tax contribution to your super before 30 June 2011, the government could match it and give you $1 for every dollar you invest - up to a maximum of $1,000.

To be eligible you must earn less than $61,920 per year, including your assessable income, reportable fringe benefits and reportable employer super contribution. If you earn less than $31,920 you may be entitled to the maximum co-contribution.

Investment properties

If you have an investment property make sure you claim everything you can against your rental income. For example, interest on the loan to buy the property is generally tax deductible.

If you’re able to pre-pay interest relating to next financial year (2011/12) before 30 June 2011, the whole interest amount qualifies as a tax deduction in the 2010/11 tax year.

Super contribution caps

The 2010 Budget made changes to how much you can contribute to your super account before the current tax concession is removed. There are caps on contributions made in 2010/2011 of $25,000 if you’re under 50 and $50,000 if you’re 50 and over.
If you’ve been salary sacrificing into your super during 2010/11 you should check where you’re up to at this point to avoid going over the limit when you add on your employer’s contributions.
The ATO expects many people to exceed the contribution caps during 2010/2011, so check with your employer, your super fund or your financial adviser very soon. Excess contributions will be taxed at 31.5*%, in addition to the standard 15% contributions tax, including the 1.5% Medicare Levy.
There are plenty of good reasons to be organised for the last quarter. Don’t leave things until the final siren on 30 June!

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