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Tax Tips for 30 June

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Super:

  • by making pre-tax super contributions [such as salary sacrifice or, if you are self-employed, contributions for which you claim a tax deduction], you could reduce your income tax and bolster your retirement savings at the same time.  But you need to be careful as pre-tax contributions count towards your concessional cap, and if you contribute above your limit the penalties can be harsh.
  • if you are self employed you can can claim a 100% personal tax deduction on all your personal super contributions.  Your pre-tax {up to the allowable concessional cap] are taxed at just 15% whereas your income is taxed up to your marginal tax rate, so there is an immediate tax savings if your tax rate is above 15%.
  • Checking your concessional contributions cap is very important.  The limit is set by the Government on the amount of pre-tax money that can be contributed to super and taxed at 15%.  However, you need to be careful as the limits were reduced on 1 July 2009.  If you are 50 or over the cap is now $50,000 per financial year.  If you are under 50 it is $25,000 per financial year.  If you exceed your cap, contributions above the cap will be taxed at an additional 31.5%, so it is important you don't go over the limit.
  • Government co-contributions:- if you earn below $61,920 and you make an after-tax contribution to super, the Government will match it dollar for dollar up to certain limits.  To be eligible for a Government co-contribution in the 2009/10 financial year, you must have made at least one eligible super contribution; your total income must be less than the limit of $61,920, 10% or more of your income must have been earned as an employee and/or from carrying on a business; you must be under 71 years of age at 30 June 2010, and you must be an Australian resident at any time in the financial year.  To be eligible for the con-contribution you must make an after-tax contribution and not claim a tax deduction for that contribution.  The maximum co-contribution payable is $1,000 and applies if your total income is $31,920 or less per annum.  Between $31,920 and $61,920, the co-contribution paid is reduced on a tiered scale.

Tax & Super:

  • if you have realised a capital gain on the sale of an asset during the 2009/10 financial year, and you are eligible to make personal deductible super contributions, you can contribute to super and offset the CGT.  You need to confirm this tax strategy with your accountant or taxation adviser to ensure that it suits your circumstances.
  • If you have made, or will be making, a spouse contribution during the 2009/10 financial year, you may be eligible for a tax rebate up to $540 for those contributions.  This rebate is dependent upon your income and again you need to speak to your accountant or taxation adviser to confirm suitability for your circumstances.

Other tax tips:

  • Margin loans: if you have a margin loan, by prepaying interest now, you can bring forward the tax deduction for this financial year [interest can be prepaid for up to 12 months in advance].  This could be on a new or existing margin loan.
  • Capital gains: if you believe that you will have a capital gains tax issue, then you may consider reviewing your assets to identify which could be redeemed/sold to effectively manage your capital gains tax situation.  You may be able to use capital losses to reduce your capital gains.  This should be done in conjunction with your accountant or taxation adviser.
  • Retirement income: you should review you annual income stream pension requirements now.  This is particularly important if you have a transition to retirement strategy in place.  The Government is yet to advise whether it will extend the draw-down relief for the 2010/11 financial year for minimum pension payments for account based and market linked pensions.  If you require assistance in this area, please contact our office.

Tax time is a very important part of the year, and there any many issues to consider at this time.  If you need help to review your current situation please contact our office on (02) 9894 9155 or by email at taggart@taggartgroup.com.au.  For any taxation issues, please discuss these with your accountant or taxation adviser.

Information in this article was sourced from Colonial First State Investments Limited e-iQ issued in May 2010, and Aviva Australia Holdings Limited end of financial year strategies issues in April 2010.  This is general information only and does not take into account your individual objectives, financial situation and needs.

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