22 Jun End Of The Financial Year as We Know It (And I Feel Fine)

So the financial year drags to a close. Today we see global equity markets down following falls on Wall Street last night on disappointing Chinese & US data, it’s pouring with rain here in Adelaide & freezing cold, the world has escaped the Greek Tsunami for the time being (not that it makes any real difference – Greece broke, living on handouts & will never repay their debts, it’s just a matter of time before they exit the Euro down the track), Fairfax & News cut journos as they move to online. So if you were reading newspapers or online news or watching TV, you would think this is the end of the world as we know it (well the Mayan year anyway). Really though we have a lot to be thankful for given the great country we live in & we only have to wait about another 15 months or so before we will have a proper government in place that can replace the store minders we have at present .

Everybody should ensure that they have their financial house in order before the end of the financial year, so here are a couple of tips to look at prior to 30/6 (warning warning – compliance disclaimer this doesn’t constitute advice so seek your own personal advice from your accountant or financial adviser – there keeps my compliance manager & regulators happy).

Private Health Funds

These guys are doing great business at the moment as high income earners seek to pay their private health fund premiums 12 months in advance to lock in their 30% rebate for the last time. With means testing coming in 1/7, singles earning > $84,000 & families > $168,000 will have their rebates reduced progressively. Rebates cease completely at incomes of $130,000 (singles) & families ($268,000)

Super Contributions

In order to make a personal contribution to superannuation you need to be aged:
→ under 65; or
→ 65 to 75 and be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which the contribution is made.
Clients who are turning 75 in the financial year (and meet the work test) must contribute before the 28th day of the month following the month in which they turn 75 (for example if the client’s 75th birthday is in April, the contribution needs to be made by 28 May of the same year).

Tax deductible super contribution limits are being reduced from $50,000 back to $25,000 as from 1/7, so this is the last year (for at least 3 years yet) that persons > Age 50 can contribute $50,000 on a tax deductible (now called “concessional”) basis. If you pay super on a salary sacrifice basis it is already too late (as you can only sacrifice prospective income), but for the self employed (or those who don’t enjoy “employer support”) for super there is still time. If you are < Age 50 you currently only have the $25,000 limit

Tax law states that any individual can claim a deduction on their contribution provided that, if they have been an employee during the year, the ‘<10% test’ is met.
Effectively this means that a deduction can be claimed by any of the following:

•  A self employed person i.e. sole trader or a partner in a partnership;
•  A substantially self employed person provided that the total income they earn as an employee is less than 10% of their total income from all sources for the financial year in which the contribution is made. This is known as meeting the “<10% test”
• A person who is not engaged in any employment activity during the financial year, aged 18 to 64 inclusive. Individuals under age 18 at the end of the financial year cannot claim a tax deduction unless they earned income as an employee or business operator in that financial year. (For individuals aged 65 and over, they would not meet the work test, so would be unable to contribute to super

Super Co-Contribution Rebate

Again the government is dropping the maximum income limit for this post 1/7 (back to $46,920 from $61,920). The co-contribution is a payment made by the government to the superannuation account . It provides a $1 benefit for every $1 invested as a personal after tax non-concessional (non-tax deductible) contribution made by a low income earner (total assessed income & fringe benefits of < $31,920) in the 2011/12 financial year to a maximum of $1,000. The maximum co-contribution phases down with increasing income, at a rate of 3.333 cents in the dollar. For individuals on $61,920 per annum and above no co-contribution is available

Super Spouse Contribution Rebate

You are able to claim a tax rebate of up to $540 if you contribute $3,000 as a spouse contribution to your Spouse’s Super Account in a financial year where your spouse’s income is below $10,800. For each dollar your spouse earns over $10,800 the rebate reduces by 18 cents and cuts out completely when income is greater than $13,800. The rebate is paid back to the contributor as a cash payment/refund through the contributor’s tax return

Pre-Pay Other Tax Deductible Expenses

Tax deductible expenses can be paid 13 months in advance. These may include interest on investment loans, income protection insurance premiums, deductible business expenses (rent, etc.) – again check with your tax adviser what is allowable

Summary

So check you financial position, cashflow & consult your appropriate adviser in making these EOFY decisions.