kristopher

Get 2024/25 off to a great start

MLC | 1st July 2014

The beginning of the financial year is a great opportunity to review your financial situation, make sure you’re on track and on top of changes happening across tax and superannuation. Here are five areas that you may wish to review early this financial year.

#1: Make your tax savings work for you

The personal tax cuts commenced on 1 July 2024 which may mean you pay less tax and have extra cashflow, and it’s important to think about the best way to make the extra dollars work for you. If you are an employee, you may have already noticed an increase in your take-home pay as less tax is withheld each pay period by your employer. You may need the savings to meet regular household expenses and manage cost of living increases. But if you have capacity, there are ways you may be able to use the tax savings to improve your financial position, such as reducing debt, increasing your cash reserve, investing for the future or boosting your super balance.

Even small amounts can make a difference over time. If you’re able to reduce your debt, you’ll have indirect savings by reducing the amount of interest you are paying. If instead you choose to build up your savings, the right option to do this depends on a number of things including:

• whether your investment goal is short term or long term
• based on how long you have to invest, what you would like to invest in (eg term deposits, shares and/or
  property), and
• whether you need access to these funds at a particular time (for example, super savings can generally
  only be accessed once you retire after age 60).

The key is to make a conscious decision to put your tax savings to work in a way that suits you best. To estimate your tax savings for this financial year, check out the Government’s calculator at taxcuts.gov.au.

#2: Review your concessional super contributions strategy

Concessional contributions include:

• contributions that your employer must make for you (Super Guarantee of SG contributions)
• salary sacrifice contributions (which are contributions from you pre-tax salary) and;
• personal contributions that you claim as a tax deduction.

A limit applies to the concessional contributions that you can make without having to pay extra tax. This is known as the concessional contributions (CC) cap. From 1 July 2024, the annual CC cap increased from $27,500 to $30,000. In addition, the rate of SG contributions that employers must make increased from 11% to 11.5%.

Therefore, the beginning of the financial year is a good time to review your super contributions strategy to ensure it continues to be right for you. This includes taking into account the increased CC cap and SG rate to ensure you do not exceed your CC cap. It could also mean starting or reviewing a salary sacrifice arrangement with
your employer if you’re able to direct some of the additional income from the 1 July tax cuts towards saving for retirement.

Your CC cap may be limited to the annual cap or may be higher if you have unused concessional contributions from the last five financial years and meet other eligibility rules. These are called unused carried forward contributions. See ato.gov.au and search ‘concessional contributions cap’ for more information.

#3: Could you benefit from the increase in the non-concessional contribution cap?

Non-concessional contributions are contributions you make from after tax income or existing savings. The non-concessional contribution (NCC) cap increased from $110,000 to $120,000 on 1 July 2024. If you’re eligible, you may be able to ‘bring-forward’ some of your NCCs from the next one or two financial years, meaning
you could make even larger contributions today. The increase to the annual cap also means that the maximum amount under the bring-forward rule increased from up to $330,000 to $360,000.

Like CCs, eligibility rules apply to NCCs. This includes limits on your total super balance, NCCs you may have made in previous financial years and your age.

Remember that investing in super has the benefit of earnings being taxed at 15% compared to your marginal tax rate which could be up to 47% (including Medicare levy). However, access to these savings is restricted generally until you are retired after age 60.

#4: Submit your notice of intent to claim tax deduction for personal super contributions

If you made personal contributions in 2023/24 and intend to claim a tax deduction, don’t forget to give your super fund your notice of intent and receive an acknowledgement before you lodge your tax return for 2023/24. You must lodge your notice of intent no later than 30 June 2024 if you haven’t lodged your tax return by that point.

You also need to lodge your notice of intent before you commence a retirement phase income stream, rollover or make a withdrawal from your super account. This includes personal contributions you have made since 1 July 2024 that you wish to claim as a tax deduction.

The timeframes are very specific and there is no discretion if these are missed, which means it could impact the tax deduction you are able to claim from these contributions.

#5: Review your estate planning goals

Just like many aspects in your life, your estate planning needs to be reviewed on an ongoing basis. Your Will and Enduring Power of Attorney should be updated to reflect any changes to your finances, investments, family and goals. Reviewing your estate plan ensures that it:

• aligns to your goals, and
• directs your assets to the right beneficiaries at the right time.

Some key life changes that may impact your estate planning include:

• getting married
• having children
• a change in relationship, such as separation or divorce
• acquiring or selling assets, or
• building your savings (including super).

Superannuation doesn’t automatically form part of your estate, which means unless you take certain action, you can’t rely on your Will to determine who’ll receive your superannuation balance when you pass away. Your super fund may allow you to make a death benefit nomination to people who are eligible beneficiaries under superannuation law.

Eligible beneficiaries include your spouse, children and certain other dependants. You can also nominate your estate if you want to make provision in your Will to distribute your super balance. Each super fund has rules about the types of nominations that you can make and other requirements for the nomination to be valid. If you make a binding nomination, the trustee of your super fund must follow your instruction if the nomination is valid and hasn’t lapsed at the time you pass away.

However, if your nomination isn’t binding or isn’t valid (for example, because the person you’ve nominated isn’t an eligible beneficiary, or you haven’t followed the requirements of your fund when making your nomination), your super fund will decide what to do with your superannuation if you pass away.

Final Thoughts:

As always let us know if you want to discuss any of the above further. Please bear in mind that not all the strategies will be applicable to you, and always speak with your professionals before putting anything in place. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!

Tax Return Checklist

We’re over the hump of the worst of winter and slowly creeping our way closer to spring. In central Vic, this means a lot of wet weather but glimpses of the warmth that might come our way soon!

Now that June 30 is over and done with and we’re well into July, a lot of you are starting to think about your tax returns and what you need to get together to give to your accountants.

There’s a whole heap of speculation over what you need to provide and where you get stuff from – so we’ve broken down some of the key points that we get asked a lot to help out.

Please note that sometimes, if you have complex investments and depending on your super fund and investment platform, you may not receive all of your information that you need for your tax return before your lodgment date. If this is the case, let your adviser or your accountant know what you’re waiting on so you can discuss options.

Here’s a checklist with some of the most frequent items we get asked about:

Tax Return Checklist

• Income Protection Premiums. If you pay for income protection insurance that is held outside of super and paid for out of pocket, you may be eligible for a tax deduction. Your insurance company will send you your EOFY statements for this with the amount you can claim anytime from now, for you to pass onto your accountant. If you have an adviser, we may also send them to you as well directly.
• Super Statements. Your 23/24 end of financial year super statements will start to become available between now and December, depending on your fund. They will be sent directly from your super fund or adviser. If you have online access you may also be able to login and download them directly depending on your fund, and don’t forget that a lot of the info flows through to your MyGov account.
• Investments. If you hold shares, managed funds, ETFs or any other similar investment within a trading platform or investment account, you will also receive an EOFY statement. As these rely on each fund manager or share company to provide reporting, they can take a bit longer to come through to you. For example, the SelfWealth platform releases these around the end of July, but some platforms will be as late as September or October.
• Notice of Intent to Claim. If you have made contributions and lodged a Notice of Intent to Claim form, you may want to provide your acknowledgement letter from your super to your accountant. These are usually completed and sent to you within a few weeks of your super contribution being reclassified.
• Advice Fees. There is so much speculation over whether adviser fees are tax deductible, and unfortunately the answer is that at the moment, they aren’t. You may be able to claim deductions for your accountant’s fees and other tax costs, but at the moment, the ATO doesn’t recognise financial advice fees as a deduction.

As always, if you want to chat just give me a ring. You can book directly in with me HERE. There are also a couple of our recent articles HERE which you may not have seen.

Take care and speak soon!

Kris

What You Actually Need To Know Before June 30

In our industry everyone bangs on about the end of the financial year (which is nowhere near as exciting or celebratory as the end of the calendar year), but people are still confused about what they should actually be doing.

This year, to make it as easy as possible for you (and us), we’ve found an amazing downloadable guide with easy, actionable information all about tax tips and super strategies to help you prepare for the end of financial year.

Have a read through, and as always let us know if you want to discuss any of the above further. Please bear in mind that not all the strategies will be applicable to you, and always speak with your professionals before putting anything in place. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!

What Happens To Your Super When You Die?

The macabre side of financial planning – it’s not just insurance cover that leads us down a morbid path in this business, it’s also your estate planning.

Estate planning is a necessity whether we like it or not. Sometimes you just have to sit down and think about what will happen when you die (the practical side, not the “is there an afterlife” side).

It’s mainly to ensure that those you leave behind are looked after and your wishes are adhered to.

What does this have to do with super?

You hear us banging on all the time about your beneficiary nominations and how important they are, but do you actually know why? The most crucial thing that a lot of people don’t understand is that your super may not form part of your estate when you die, meaning what’s in your will doesn’t impact it. Considering super is often a person’s most valuable asset (especially as most of us have been building it since we were 14!), you definitely want to make sure that it’s left to the people you want to have it.

The Facts.

To make our job super easy in getting the info over to you, our friends at Colonial First State have put together one of the best fact sheets we’ve seen on what happens to your super. It’s got all the facts, breaks it down into who you can nominate and what those nominations involve, and also goes through an explains a lot of the jargon and key words/phrases that you need to know.

You can get a copy here.

Have a read through, and as always let us know if you want to discuss any of the above further. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!

2024’s Key Dates To Keep On Top Of Your Financial Game

New Year, new you! As we charge into 2024 refreshed and recharged from another festive season, now is a great time to get on the front foot and understand some key dates that will help you keep on top of your financial game for another year.

Super Transfer Balance Caps

In January and February, the release of the Consumer Price Index (CPI) and Average Weekly Ordinary Time Earnings (AWOTE) figures will play a pivotal role in determining potential changes to the general Transfer Balance Cap (TBC), contributions caps, and associated Total Super Balance (TSB) thresholds starting from July 1, 2024. While the impact may seem distant, it’s crucial to consider implications for contribution and retirement advice before the end of this financial year.

With the inflation rate showing signs of easing, the likelihood of the general TBC being indexed to $2 million from July 1 seems somewhat improbable. However, it’s advisable to stay vigilant, as any adjustment to a $2 million cap could influence advice early in the upcoming year.

For instance, individuals should weigh the decision of commencing a retirement phase pension before or after July 1. Is it worthwhile to wait for potential indexation and a higher personal TBC? Understanding the costs involved is crucial. It’s also essential to assess the impact of pension refreshes on any indexation of the client’s personal cap, whether performed before or after this critical date.

Additionally, a review of clients with high-balance Transition to Retirement Income Streams is recommended, especially those who may fulfill a full condition of release before the fiscal year’s end. A Transition to Retirement (TTR) pension automatically enters retirement phase when an individual turns 65 or notifies the super fund that they’ve met specific full conditions of release.

These arrangements may necessitate a thorough review, with considerations to either commute part or all of the pension balance back to accumulation. This is done to avoid an excess transfer balance amount or to maximize the personal TBC by ensuring entry into the retirement phase aligns with the higher TBC when it takes effect.

Super Contribution Caps

Recent upticks in Average Weekly Ordinary Time Earnings (AWOTE) are pointing towards a potential expansion of contribution caps. This could result in an increase to both concessional and non-concessional caps, potentially reaching $30,000 and $120,000, respectively.

It’s important to note that the general Transfer Balance Cap (TBC) plays a crucial role in determining Total Super Balance (TSB) thresholds, which, in turn, influence non-concessional limits for high-balance clients, including those falling under the bring-forward rule. Consequently, any adjustments to either contribution caps or the general TBC will have implications on the eligibility for non-concessional contributions in the upcoming financial year. The table provided below offers a summary of potential limits effective from July 1, based on potential indexation.

As depicted in the table, the indexation of the general TBC holds the potential to enhance contribution opportunities for high-balance clients. However, it’s noteworthy that if contribution caps increase while the general TBC remains at $1.9 million, eligibility for contributions from July 1 might experience a slight decrease.

Given these potential changes, it is advisable to closely monitor developments early in the new year to maximize contribution opportunities and to be mindful of various scenarios. The table below outlines the potential outcomes to facilitate a better understanding.

Concessional Contributions

As we approach the end of the financial year, it’s crucial to review contribution strategies, especially with the imminent expiration of unused concessional contributions carried forward from FY19 and the commencement of Stage 3 tax cuts on July 1. This presents an opportune moment to ensure clients optimize their use of the concessional contributions cap.

Since July 1, 2018, the ability to carry forward unused concessional contributions for up to five financial years has been in effect. This means that the current financial year marks the final opportunity to capitalize on unused concessional contributions accumulated in FY19. Voluntary concessional contributions can be facilitated through a salary sacrifice arrangement or by claiming a deduction for a personal contribution, if eligible. It’s important to note that only prospective income can be salary sacrificed, necessitating a review of agreements in a timely manner to capitalize on unused concessional contributions. Alternatively, making a personal deductible contribution may be the simplest way to leverage the concessional contributions cap. However, it’s crucial to submit a valid Notice of Intent within the specified timeframes and before any withdrawals, rollovers, or pension initiations.

To determine available unused concessional contributions, clients can log into myGov. Additionally, the Total Super Balance (TSB), which must be below $500,000 on the prior June 30, is displayed on a separate screen, so it’s important to verify both components.

Conclusion

As always at the start of a new year, it’s so important to make sure you have some key dates marked on the calendar to refresh your finances and make sure you take advantage of changes. If you want more information on the above, don’t hesitate to get in touch with us by booking in a free 20 Minute Discovery Call here. Don’t forget to check out some of our other articles on similar topics, like this one here.