Maximise Wealth, Minimise Risk: 2023 Guide to EOFY Financial Planning

There’s a lot to consider when it comes to end of financial year planning. As always, BlueRock aims to provide constructive and proactive communication to our clients around this time, so we’re sharing some of the key items that you should consider with 30 June just around the corner.

EOFY Consideration 1: Contributing To Superannuation

MAKE PERSONAL CONCESSIONAL CONTRIBUTIONS AND SALARY SACRIFICE

It’s not too late to consider topping up your concessional contributions with any surplus cash or savings. This can provide you with a tax deduction for the amount contributed. Before making any top up’s to superannuation, remember to review the levels of super contributions made to date, to ensure you are within the limit for this financial year.

“Concessional” super contributions mean you get a tax concession from the ATO and contributions of this nature are $27,500 for the 2023 financial year. If you’re aged between 67 and 75, you’ll need to satisfy the work test in order to make personal tax-deductible contributions. To recap, the work test requires you to demonstrate that you’ve worked at least 40 hours during a consecutive 30-day period. If you’re 75 or over, you’re ineligible to make personal tax-deductible contributions.

CONSIDER COMPANY CONTRIBUTIONS

For business owners, considering company contributions to superannuation before 30 June up to the maximum levels can be an effective tax planning and wealth accumulation strategy. This should be considered as part of a wider tax planning exercise with your accountant, and with reference to your personal wealth management plan.

CARRY FORWARD UNUSED CONCESSIONAL CAP

From 1 July 2018, if you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you could be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts. Unused amounts are available for a maximum of five years, after this time they will expire, and 30 June 2023 will be the first time in which unused amounts will begin to expire.

CONSIDER NON-CONCESSIONAL CONTRIBUTIONS

The non-concessional contribution cap remains at $110,000 this financial year, and with the “bring forward provision” (utilising a 3-year period), a lump sum contribution of $330,000 may be possible. The age limit for the bring forward provision has increased this financial year to 75, from 67, which now allows more Australians to take advantage of this.

It’s also worthwhile noting that the total superannuation balance is increasing to $1.9 million on the 1st of July 2023, from $1.7 million, so you may want to get advice on timing of your lump sum super contributions. The increase to the total superannuation cap to $1.9 million also creates opportunities to plan when to commence your superannuation pensions. It is important that you speak to your financial advisor to strategise on the best outcome.

EXPLORE SPOUSE CONTRIBUTIONS

In some circumstances, you can contribute $3,000 into your “lower income earning” spouse’s superannuation fund to receive a tax rebate of $540 (which is a nice 18% return!). The income threshold for the “lower income earning” spouse remains at $37,000 (lower threshold where you’ll be entitled to the full tax rebate) and $40,000 (upper threshold where you’ll be entitled to a portion of the tax rebate), with none for incomes above $40,000.

IS THE GOVERNMENT CO-CONTRIBUTION AVAILABLE?

If your total income is less than $57,016 and you make a personal non-concessional (after-tax) contribution to super, you may be eligible to receive a government co-contribution of up to $500.

LOW INCOME SUPERANNUATION TAX OFFSET (LISTO)

For those with a taxable income of under $37,000, if your employer (or you) makes concessional contributions on your behalf, then you can expect a refund of the 15% contributions tax that was deducted from your superannuation account (of up to $500).

HOME DOWNSIZING CONTRIBUTIONS

If you’re 55 or older and meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home. The downsizer contribution needs to be made to superannuation within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.  You will need to tick off a few eligibility criteria, so before making such a contribution, check with your advisor.

EOFY Consideration 2: Accessing Your Superannuation

ANNUAL PENSION PAYMENTS

It’s important to ensure you have drawn an appropriate level of pension for the current financial year and considered next year’s pension payments as part of your planning. This is particularly important where your funds supporting an Account Based Pension are held within a Self-Managed Superannuation Fund. If your account-based pension is held via a retail platform, the product provider has measures in place to ensure your minimum and maximum payment amounts are met.

TEMPORARY REDUCTION IN MINIMUM ANNUAL PENSION AMOUNTS

For many individuals, the losses in financial markets as a result of the COVID-19 pandemic are having a negative effect on their superannuation account balance. To assist, the government has reduced the minimum annual payment required. The reduced minimums apply for the year ending 30 June 2023. The Government has not announced whether the reduction will continue into the 2024 financial year.

Minimum annual pension payments are based on age and revised balances as at the end of 30 June 2022.

EOFY Consideration 3: Reviewing Your Investment Debt

Depending on your debt structure and tax position, it may be appropriate to consider pre-paying interest on investment loans you have. This may allow you to claim additional tax deductions this year against your investment income. Also, consider reviewing your debt structure to make sure it’s set up in the most efficient manner for asset protection and tax/cash flow management. With rising interest rates, check in with a lending specialist to review your current loans and interest rates.

EOFY Consideration 4: Capital Gains Tax Planning

If you sold an asset for a gain during the current financial year, ensure you consider the effect of this on any aspect of your planning and implement available strategies that may reduce this liability.

EOFY Consideration 5: Tax Planning and Forecasting

Tax planning involves sitting down with your accountant and forecasting your likely tax position at 30 June, factoring in your personal and business affairs. You should be aware of your expected position leading into 30 June and confident that effective strategies are being utilised. Some of these strategies, such as nominating Family Trust distributions, are critical for ensuring you achieve the right tax outcome and must be dealt with before 30 June.

It’s important to effectively integrate your wealth, accounting and tax adviseos to ensure a holistic approach is considered.

EOFY Consideration 6: What Happens Next?

There are multiple EOFY planning strategies available (depending on your individual circumstances) and there are equally as many important considerations to factor into your planning for the next financial year. For the best results, you need to be proactive and plan ahead.

SUPERANNUATION

To take advantage of any of the superannuation contributions detailed above, it’s worth considering making them regularly throughout the year to ease the burden on cash flow at the end of financial year. It’s easy to establish regular contributions into superannuation and your financial adviser can facilitate this with you.

SPOUSE SUPERANNUATION SPLITTING

Individuals may be able to split certain superannuation contributions with their spouse, enabling them to boost their spouse's super savings with some of their own. If you're planning to split all or part of your contributions with your spouse for the previous financial year, but you also want to claim a tax deduction for them, you must give the notice of intent to claim a deduction first. Since the pension cap limits came into effect, spouse splitting has become an important strategy to maximum the amount of benefits a couple could have in pension phase. It is therefore worth talking to your advisor to maximise this future opportunity.

ADJUSTING ANNUAL PENSION AMOUNTS

If you’re drawing regular pension payments, it’s important to note that the temporary reduction in minimum annual pension amounts due to COVID-19 ends by 30 June 2023.

From 1 July 2023, the minimum annual pension amounts will revert as follows:

Talk to Us Today About Your EOFY Financial Plans

For our clients who we proactively advise regarding end of financial year planning, we’ll be in touch with you soon! And if you’re not currently working with one of our advisors, we’d love to chat to you about how we can help maximise your wealth and minimise your risk. Get in touch with a BlueRock Private Wealth or Private Client advisor by completing the form below.‍

Disclaimer: The information in this document is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.