5 money-makers you should add to your end of financial year checklist

The end of financial year (EOFY) sales see millions of Australians flocking to the shops to grab a bargain and make their money go further for less — but many Australians are unaware of Government initiatives that can also help their money go even further through tax offsets or co-contributions. 

With the EOFY fast approaching, now is the time to review your financial situation and create an end of financial year checklist so you can bag more financial savings at tax time. Here, we share some of our top money-making tips to add to your checklist this year.

But first, some common EOFY questions answered 

• What is a financial year in Australia?
  
  A “financial year” (otherwise known as a fiscal year) is a time period of 12 months used for tax purposes. In Australia, the financial year starts on the 1st of July and ends the following year on the 30th of June. At the end of the financial year, many business owners wrap up their books and start finalising their tax time paperwork and accounting.

• When are taxes due in Australia?
  
  If you are lodging a tax return yourself for the previous financial year, it is due by the 31st of October. If you use a tax agent or accountant to complete your tax return, you will be eligible for an extended tax return deadline — depending on the circumstances, this can be as late as the 15th of May the following year.
  
  It is important to note that if you want to use an accountant or take advantage of this extension, you will need to sign up with your accountant before October 31st. You will not be eligible for a tax return extension if you have outstanding tax returns.

• How is this financial year different from the last?
  
  In contrast to last year, we now clearly understand COVID-19’s financial impact. This means we can assess how the pandemic has affected everyone’s finances. If you are a business owner, we may strip back the “COVID numbers” like taxable government benefits to establish how well you’re doing without inflated support.  

Money-makers to add to your end of financial year checklist

Salary sacrifice bonuses into superannuation

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By salary sacrificing your bonuses, you can put pre-tax money into your superannuation, reducing your taxable income and the amount you pay in tax for the year. The benefits of salary sacrificing are subject, of course, to your marginal tax rate. 

For example, if you pay tax at the highest marginal tax rate of 47%, you can place your bonuses directly into super and only pay 15% tax on that income — a total saving of 32% 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 your age. See the table below.

Age (on June 30th 2022)	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 in the above limits.

To take advantage of this strategy, you will need to arrange it with your payroll department in advance. Unfortunately, salary sacrifice options are not compulsory in all workplaces, so check with payroll to see if this is possible. You should also check with your employer as time limits may apply to sacrificing salary bonuses.

#2. Superannuation co-contribution (potential to make up to $500) 

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Under the Government’s superannuation co-contribution scheme, for every tax dollar you contribute, the Government will match it with a co-contribution of 50 cents.  

If you are eligible and you make under the $41,112 threshold for the 2021/2023 financial year, 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 $56,112.

#3. Spouse contributions (potential to make up to $540)

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Does your spouse earn less than $37,000 per year? It might be well worth looking into making super contributions on their behalf. There is a maximum tax offset of $540 available when $3,000 or more is contributed to your spouse’s superannuation.

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

• $3,000 reduced $1 for $1 by the amount by which the spouse’s total income exceeds $37,000, or;

• The total amount contributed by the spouse up to a maximum of $3,000 (i.e. 18% x $3,000).

In instances where the contribution is less than $3,000, the tax offset amount is calculated at 18%. For example, Jim’s wife earns $10,000 per year. If Jim contributes $1,500 to 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 — the higher-earning spouse gets a saving of up to $540 (for a $3,000 spousal contribution) against what they owe the Government in tax.

#4. Rejig your portfolio (potential to save on capital gains tax)

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Before the end of the financial year, check that your investments are working for you. 

Do your investments still meet your needs? 

You can rejig your portfolio by selling off underperforming investments. 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, 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. If your spouse has all the savings accounts and shares in their name, it could mean the difference between a marginal tax rate of 21% and 49% on interest or dividend earnings.

#5. Pay income protection in a lump sum (helps to reduce taxable income)

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Income protection can help maintain your lifestyle with up to 75% of your income replaced if 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). It could help reduce this year’s tax.

Let’s refine your end of financial year checklist and boost your returns

While funnelling your energy into an end of financial year checklist is less exhilarating than the EOFY sales, EOFY planning can be far more valuable. 

The EOFY is a great time to review your finances and take advantage of the Government saving initiatives listed above. Depending on your own financial situation, some of these tips may not be suitable — regardless, being more tax aware and strategic in your financial planning year-round can help you save or make money.

Contact the team from Elliot Watson Financial Planning. We can review your end of financial year checklist and provide expert recommendations to maximise your tax return. 

The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. 

Before acting on this information you should consider its appropriateness regarding your objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.

The views expressed in this publication are solely those of the author; they are not reflective or indicative of the licensee’s position and are not to be attributed to the licensee. They cannot be reproduced in any form without the express written consent of the author.

Elliot Watson Financial Planning Pty Ltd is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.