The end of the financial year is fast approaching, so what should you be doing now to prepare – and, to save money?
We chatted to AMP financial adviser Andrew Heaven, and asked him to share his top tips.
“Being prepared, reviewing your super contributions and submitting your return on time are good policies every year, but with the current economic environment, this EOFY is more important than ever,” says Andrew. “There are quite a few changes this financial year coming into effect around tax and super.”
While the below tips are useful to keep in mind, it’s important to remember that they are general in nature. Tax time is a great opportunity to talk to a tax professional to make sure you get the most money back, and talk to your financial adviser to regroup on the financial year prior and also plan for the future.
“Just like you set resolutions at New Year’s, it’s great to set financial resolutions at the start of a new financial year,” says Andrew.
Consider making a super contribution
EOFY is a good time to take advantage of the lower rates of taxation on super, says Andrew – and while it might be hard to prioritise your super right now, it’s worth remembering that making additional contributions today could seriously boost your super balance down the track.
“Additional super contributions can also act as a way to reduce your overall taxable income,” says Andrew. “And, if you’re a low or middle-income earner who is able to make after-tax super contributions, the government may also make a co-contribution of up to $500.”
If your pay cheque has taken a hit and your taxable income has fallen to $37,000 or below, you may be eligible for the low income super tax offset – 15% of the concessional super contributions paid to your super fund, up to $500.
“If you want to claim a tax deduction on your after-tax contributions, you’ll need to tell your super fund by filling out a notice of intent form and have it lodged and approved by your fund before you complete your tax return,” says Andrew. “And, if you earn more than your partner and would like to top up their super – or, vice versa – consider spousal contributions as the spouse making the contribution could be eligible for a tax break.”
Hunt for bargains
With the EOFY comes mid-year sales, as retailers offer big discounts to clear old stock. Whether you need a new laptop or are planning on upgrading your car, it’s worth timing your purchase with the end of the financial year – especially if you can claim it as a legitimate work expense.
“This EOFY, the awakening of the economy may see more businesses hold sales to increase short term cash flow,” says Andrew. “It’s also worth noting that with many retailers switching to a cashless payment system, many retailers might focus their efforts online more so than physical stores.:
EOFY can be a great way to nab a bargain and make that big purchase you’ve been putting off for long, but remember that while it’s easy to give into the temptation of sales, make sure you don’t blow the budget.
Find out what you’re entitled to claim
With so many more of us working from home lately, there may be a number of expenses you can claim in your 2019/2020 tax return.
“The government has recently released new guidance on claiming working from home expenses as a tax deduction,” says Andrew. “As many have had to set up an office at home, it will be well worth familiarising yourself with the new guidelines to ensure you make the most of EOFY deductions.
“Due to the COVID-19 crisis, the ATO will accept a shortcut method for calculating running expenses from 1 March to 30 June.”
Consider pre-paying your insurance premiums
If you have income protection, and if your budget allows it, consider pre-paying your premiums 12 months in advance.
“Doing so can allow you to take advantage of claiming a bigger tax deduction this year,” says Andrew, “and this method can work well if your income is higher in the current income year than next.
“That said, this method can be complicated so it’s important to seek advice from a financial adviser and tax agent to make sure that doing so this financial year is a good idea.”
Count your capital gains and losses
When you sell an investment – be it a share, an investment property, or a managed fund investment – you will either make a capital gain or a capital loss: the difference between the cost for you to obtain and keep the investment, and what you received when you sold it.
“If you make a gain, this could push your taxable income into the next bracket causing you to make pay more in tax,” says Andrew. “If you’re new to investing, getting your head around capital gains and losses can be quite confusing and daunting. To make sure everything is done correctly, speak to your financial adviser and tax agent to determine the best course of action for you.”
*Andrew Heaven, of Wealth Partners Financial Solutions, is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.