Smart Strategies for EOFY 2023 & Beyond!

With the end of the financial year (EOFY) fast approaching, it’s crucial to start considering your tax planning strategies to maximise your financial outcomes. With June 30 just around the corner, now is the perfect time to ensure that you’ve covered all the necessary aspects of your end-of-year tax planning.

Unlocking Financial Success

In this article, we explore some of the effective strategies that may help you optimise your tax planning and achieve your financial goals. From making super contributions and reassessing your investment portfolio to managing pension payments, there are several strategies you can implement to make the most of EOFY 2023. The key is to act now!

Claim a deduction of up to $27,500 for personal contributions to super

By making a before-tax contribution to your super, you could boost your retirement nest egg, and by claiming a tax deduction, you could reduce your taxable income.

The $27,500 includes any employer SG contributions, so make sure you don’t go over.

You’ll need to meet the work test if you’re 67 and over, and you wish to use this strategy and must submit the correct paperwork to claim the deduction.

Using Carried Forward Contributions

Carry-forward contributions are not a new type of contribution; they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap ($27,500 in 2023 and 2022 and $25,000 in 2021), you can carry forward the unused amount and take advantage of it up to five years later, as long as your total super balance is under $500,000 at 30 June of the previous financial year.

Carry-forward contributions are calculated on a rolling basis over five years, but any amount not used after five years expires. These carry-forward rules only relate to concessional contributions into super, not non-concessional contributions, as they have different caps.

The best way of checking if you have any unused contributions is to check your MyGov, let us know if you need some help here.

Make a spouse contribution

If your spouse earns under $40,000 each year, their super could benefit from a top-up. If you contribute to their super, you may receive an offset of up to $540 in your tax return for contributions of up to $3,000.

Warnings for Superannuation for high-income earners…

The income threshold at which the additional 15% (‘Division 293’) tax is payable on super is $250,000 p.a. Where you are required to pay this additional tax, making super contributions within the cap is still a tax-effective strategy. With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare levy).

 Non-Concessional (After-Tax) Contributions

You also have the option of making after-tax (non-concessional) contributions into Super up to an amount of $110,000.  If you’re eligible, you can utilise the “bring-forward” rule and effectively contribute up to $330,000 in one financial year as long as you haven’t triggered this rule in the prior two financial years.  If you do trigger the “bring-forward” rule, you won’t be able to make further non-concessional contributions for the next two financial years.
You also need to be careful of your total Super Balance; if you’re nearing $1.7 million or over, you may be restricted to the amount you can contribute; however, this cap is increasing to $1.9 million on 1 July 2024.  If you’re unsure, it is best to speak to one of the JBS team to determine the level you can contribute.

Receive a co-contribution by making a personal super contribution

If you earn less than or equal to $42,016, you could contribute $1,000 to super and receive the maximum co-contribution of $500 (based on 50c from the government for every $1 you contribute). The amount of the co-contribution reduces as your earnings increase and cuts out entirely at $57,016. To receive the co-contribution, you will need to meet certain conditions, including a requirement to lodge a tax return for the year and be under 71 years of age at the end of the financial year.

If you are thinking of helping your child or grandchild build wealth for their future, you could assist them by giving them funds to contribute to super to receive the co-contribution. This will be preserved until they retire after their preservation age or meet another condition of release but can have a powerful compounding effect over their lifetime.

Prepay interest on your investment loans

When you borrow money to make an investment that will generate assessable income, you are generally entitled to a tax deduction for the interest on the money borrowed.

Towards the end of the financial year, many investors who gear into property or shares will prepay interest for up to 12 months (with the 12-month period ending before 30 June next year). Doing so will allow you to lock in the interest rate you pay for the next financial year and will bring forward your tax deduction to this financial year if you are a small business entity or an individual incurring non-business expenditure.

Prepay your income protection insurance premium

If you have or are considering income protection insurance, you could claim your premium as a tax deduction. If you choose to pre-pay your premiums for the next 12 months and that 12-month period ends before 30 June next year, you can bring forward a tax deduction from next year to the current year, plus paying annually can save you approximately a month’s premium. As many Australians are underinsured, this can be a great way to protect yourself, your family and your business while managing your tax.

Ensure you take your minimum pension payment for FY23

For those whose superannuation benefits are in the pension phase, it is essential that you take your minimum pension amount to ensure your earnings remain tax-free. If you have a SMSF, consider contacting your accountant or administrator to ensure you have taken the minimum amount before 30 June.  Remember that the minimum drawings are 50% of the normal schedule due to Covid relief.

Review your portfolio for tax efficiency

Investors should review their portfolios and clean up those loose ends. If you have carried forward losses, these can be offset against capital gains to minimise tax payable. Be aware that the Australian Tax Office (ATO) has issued warnings against wash sales, where an asset is sold and repurchased, to minimise tax payable. Ensure transactions are investment-driven, not tax driven.

Make a tax-deductible donation to charity

Finally, tax time can be a great time to think about helping others. If you donate to an eligible charity, keep your receipt and claim a deduction in your annual tax return.

Plus, there are a number of other strategies for small businesses, such as expensing asset purchases, deferring income, bringing forward expenses and the like.

As the end of the financial year approaches, taking proactive steps to make the most of your tax planning opportunities is essential. By implementing the right strategy, you can ensure that you optimise your financial outcomes and set yourself up for success in the new financial year. However, tax planning can be complex, and seeking professional advice tailored to your specific circumstances is always beneficial. So, don’t hesitate to contact our JBS Financial team for expert guidance and support. Take action now and make the most of EOFY 2023!

For help creating your tax and super strategy, reach out to us here.

Source: ATO