Seven Strategies for the End of Financial Year

Wow! Can you believe it is that time already!! This time next week it will be the last day of the 2015/2016 Financial Year!! To think in the last 12 months so much has happened!

The All Ords opened on the 1st July 2015 at 5506, hit lows under 5,000 in February 2016 and still has to cope with the effect of Brexit in the next week.

Australia saw yet another change in our Prime Minister and an election called for the start of the new financial year. We also have seen what seems like the longest and most controversial election campaign in the US history with the chance of Donald Trump becoming the next US president.

The budget was announced on the 3rd May and have heard quite a bit about “jobs and growth” ever since. There was some great wins for small business, middle income earners and young job seekers. The news was not so good for High end Superannuation accounts and high income earners, potential retirees and smokers (might be a good time to stop!).

The North Queensland Cowboys took out the NRL premiership and the Newcastle Knights won the wooden spoon. We won’t talk about the mighty Dragons L

What can you do in the next week to be fully prepared for the End of Financial Year? Below are some tips to reduce your tax and boost your savings.

Seven Strategies for the End of Financial Year

  1. Boost your Superannuation. Potentially this can be a double whammy where you can increase your Super and potentially decrease the tax you pay. You can make additional contributions from either your pre-tax (classed as concessional) or after-tax (classed as non-concessional) income. If you make a contribution to your super from your pre-tax income, such as salary sacrifice, the contribution will be taxed at 15% which may be lower than your marginal tax rate, depending on your income level. If you make a contribution from your after-tax income, the contribution will not be taxed. If you exceed any of your contribution caps, however, you may have to pay additional tax. If you’re self-employed, you could be eligible to claim a tax deduction for the current financial year for your personal contributions made before 30 June.
  1. Top up your spouse’s Superannuation. If you make an after-tax contribution of up to $3,000 to your spouse’s super by 30 June 2016, and your spouse is under 70 years of age when you make the contribution, you could receive a tax offset of up to $540 if their income is less than $13,800 for the 2015/16 financial year. If your spouse is aged between 65-69, they must also have been gainfully employed for at least 40 hours over 30 consecutive days in the financial year in which the contribution is made.
  1. Taking advantage of the Government Co-Contribution. If you make after-tax personal contributions into your super, you may be eligible for a top-up from the Government called a Government co-contribution. If you are eligible and your total income* is less than $35,454 (for 2015/16), then you will receive 50 cents from the Government for every after-tax dollar you contribute to super, up to a maximum of $500.
  1. Prepay your Income Protection insurance. Income Protection insurance protects you for up to 75% of your income if you are unable to work due to illness or injury. If you have or are considering income protection insurance, you can prepay your premiums for up to 12 months. This may allow you to bring forward a tax deduction from the following year into the current year – potentially reducing your taxable income this financial year.
  1. Reduce capital gains. Your investments will move around in value and you may be sitting on some paper losses from shares or other investments. This could be a good time to sell some of your poor performers to offset against capital gains made on the sale of other investments over the past 12 months.
  1. Start or review your Budget for the new Financial Year. Now is the time to start thinking about planning your day to day finances for the next financial year. One of the best ways to do this is to create a budget. Here are our top tips for creating an effective budget:
    1. Identify and list down what you want to achieve. What are your goals?
    2. List them in order of importance (most important to least important).
    3. Break your goals down into immediate (now!), short term (1-2 years), medium term (3-5 years) and long term (over 5 years).
    4. Determine what action you need to take and any resources you need in order to implement your action items and ensure you write them down.
    5. Evaluate your progress on a regular basis and take corrective action if/where needed.
    6. Celebrate your success. When you achieve your goal make sure it is celebrated.
  1. Get ready to lodge your tax return in July. Make sure you are prepared to lodge your return as soon as your employer gives you your PAYG summary and financial institutions send your confirmations of tax deductible items. If you store your receipts in a shoe box start a filing system so you have everything ready to lodge your return in July.

Happy end of Financial Year! Time to reset your goals and focus for the next year to keep smashing your goals and increasing or maintaining your Financial Fitness. Donna and I are training hard at 5.45 am in the mornings to work on our physical fitness and then strategising all day on your financial fitness.

From your Chief Financial Coach.

Phil.

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