To help with end of year planning for clients, there are four key areas to review before the financial year ends.
1. Self-managed superannuation funds (SMSFs)
The end of year tips for SMSFs can be grouped into compliance requirements and strategic opportunities.
Compliance tips:
- Pensions – check all pension members have taken the minimum pension income from an account-based pension before July 1 to avoid being taxed as an accumulation account for the whole year.
- Investment strategy – review and update if necessary. Document the review (and any changes) in trustee minutes.
- In-house assets – ensure these assets do not exceed 5 per cent of total assets at June 30.
- Collectibles and personal use assets – ensure all of these assets (including those purchased before July 1, 2011) comply with the current rules for holding and using the assets, or ensure the assets are disposed of before July 1.
Strategic opportunity:
Contributions reserving – clients who want to maximise tax deductions in the current financial year, but in doing so would exceed the concessional contribution cap, may be able to make the contributions in June and use reserving to defer allocation to the member’s account until July (by July 28). This allows contributions allocated in July to be applied against the caps for 2016-17.
2 Maximising concessions for super contributions
As contribution caps and other concessions are applied on a financial year basis, a review for clients may identify whether opportunities exist to top up contributions before July 1 to maximise the concessions.
- Use contribution caps – clients who have not fully utilised the contribution caps may have an opportunity to top up contributions before July 1. Remember, clients who turned 50 in the current year will now be able to use the higher transitional cap for concessional contributions.
- Meet deadlines – contributions need to be received by the super fund trustee by June 30 if deductions are to be claimed for this year. If using a clearing house, a few extra days may need to be allowed for the contribution to be paid to the trustee.
- The 27 fortnight year – this financial year has an extra fortnight so it may be critical to review the contribution strategies and timing of payments as soon as possible to ensure the extra fortnight does not cause caps to be exceeded.
- Contribution splitting – clients who want to split contributions made in 2014-15 need to advise
the trustee before June 30, 2016. - Co-contribution and spouse tax offset – look for opportunities to access these two concessions with contributions before July 1.
3 Tax planning
- Health insurance – if clients have adjusted taxable income over $90,000 (singles) or $180,000 (couples) but did not have private health insurance, they will be liable for the Medicare Levy Surcharge for 2015-16. To avoid the same result next year they may wish to consider taking out hospital cover before July 1.
- Bring-forward deductions – clients may wish to pre-pay expenses to bring the deduction forward to this financial year. Some ideas may include: paying annual income protection premiums or prepaying the next year’s interest on deductible loans.
- Offsetting capital gains/losses – if assets have been sold which realised either a capital gain or loss, a portfolio review could be undertaken to determine whether it is timely to sell other assets in the reverse situation to offset the gain or loss. Care should be taken to avoid wash sales [Taxpayer Alert 2008/7].
4 Small business
- SG payments – consider paying the June quarter SG payments by June 30 to maximise deductions this financial year.
- Director loans – ensure loans are repaid or appropriate loan arrangements are put in place to avoid classification as an unfranked dividend.
The June 30 deadline is not just about preparing for this year’s tax return. It is also a good time to reflect and to get ready for the coming year to help clients gain the full advantage of the year ahead.
Clients should always be referred to their tax adviser for any advice in relation to taxation planning; and it is important that strategies are not recommended just for tax outcomes to avoid anti-avoidance provisions.
