skip to Main Content

End of Financial Year (EOFY) – Financial Planning Checklist

The end of financial year (EOFY) sales see Australians flocking to the shops to bag a bargain in order to make their money go further.  But many Australians are unaware of Government initiatives which can also help their money go further through tax offsets or co-contributions.  With the EOFY fast approaching, now is the time to review your financial situation.  Below are the top five tips on how to bag a financial-savings bargain!

Salary sacrifice bonuses into superannuation

Salary sacrificing bonuses can deliver as much as a 34% tax saving on your bonus income*

Salary sacrificing your bonuses enables you to put pre-tax money into superannuation – thereby reducing your taxable income and the amount that you pay in tax that year. The benefits of salary sacrificing are subject to your marginal tax rate.

*For example, if you pay tax at the highest marginal tax rate of 49%, you can place your bonuses directly into super and only pay 15% tax on that income.  A saving of 34% tax. if your income exceeds $300,000, you may be liable for an additional 15% tax on these contributions.

Limits apply to how much you can put in each year depending on age. See the table below.

Age (on June 30, 2015)

Concessional contribution limits per person per year**

Less than 49

$30,000

49 and over

$35,000

** It’s important to note that contributions made by your employer known as Superannuation Guarantee Contributions (SGC) are included the above limits.

In order to take advantage of this strategy you need to put arrangements in place with your work’s payroll department in advance.  Unfortunately salary sacrifice options are not compulsory in all work places so first check with your payroll to see if this is possible. furthermore you should check with your employer as time limits may apply when salary sacrificing bonuses.

Superannuation co-contribution

This is a way of making up to $500 

Under the Governments superannuation co-contribution scheme for every after tax dollar you contribute the government will match it with a co-contribution of 50 cents.  If you are eligible and you make under $35,454 in the 2015/16 financial year then you could receive the maximum payment of $500.  The amount the government will co-contribute reduces on a sliding scale to zero once your total income reaches $50,454 (see the table below).  To see if you are eligible refer to the ato.gov.au website.

Total income for 2015/16

Government co-contribution

$35,454 or less

$500

$35,455 – $50,453

$0-$500 (reducing by 3.333 cents for every dollar earned above $35,454)

$50,454 or more

$0

 Spouse Contributions

Potential tax saving of up to $540

Does your spouse earn less than $13,800? If yes, then it might be well worth looking into making super contributions on their behalf.  There is a maximum tax offset of $540 available when up to $3000 is contributed into your spouse’s superannuation.

The amount that can be offset is 18% of the lesser of:

  • $3000 reduced $1 for $1 by the amount by which the spouse’s total income exceeds $10,800, or
  • the total amount contributed by the spouse up to a maximum of $3000 (i.e. 18% x $3000)

In instances where the contribution is less than $3000, the tax offset amount is calculated at 18%.  For example Jim’s wife earns $10,000 per year.  If Jim contributes $1500 into his wife’s superannuation account, he would receive a $270 (0.18 x 1500) tax offset.

This is a tax offset, not a reduction in taxable income, therefore the higher earning spouse gets a saving of up to $540 (for a $3000 spousal contribution) against what they owe the Government in tax.

Re-jig your portfolio

Potentially save on capital gains tax

Before the EOFY it is a great time to check that the investments that you have are working for you.  Do your investments still meet your needs? Re-jig your portfolio by selling off those that are underperforming or if you are heavy in one particular sector.  If you are lucky enough to have made a capital gain, review your portfolio to see if you can trigger any losses to offset the gains, thereby reducing your overall gain and tax liability.

Another thing to consider, particularly if you have a low income earning spouse, is to revise whose name the investment is in.  Having your spouse hold saving accounts and shares in their name could mean the difference between a marginal tax rate of 21% and 49% on interest or dividend earnings.

Pay Income protection in lump sum

Helps you save by reducing your taxable income

Income protection can help maintain your lifestyle with up to 75% of your income replaced in the event you are unable to work due to sickness or injury. If you have or are considering taking out Income protection consider paying the full year amount now (not in monthly instalments). This could reduce this year’s tax.

Whilst potentially less exhilarating than the EOFY sales, EOFY financial planning can be just a lucrative.  The EOFY is a great time to review your finances and take advantage of the Government saving initiatives. Depending on your own financial situation some of the above tips may not be suitable. But regardless, being more tax aware and strategic in your financial planning year round can help you save or make money.

Disclaimer

The information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement.

 If you need more specific advice please contact Certified Financial Planner Elliot Watson on 0409 931 984.

Elliot Watson Financial Planning Pty Ltd* and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 AFSL 238429.
Back To Top
Close search
Search