Being super smart before the end of financial year FY23
The importance of making the most of the opportunities prior to 30th June this year is just as important as previous years. This is because legislation changes over recent years have seen the Government cracking down on how much you can get into super.
Why? Because it’s still the most tax effective vehicle for your retirement savings.
There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.
Here are 13 ideas that we will be considering with our clients this end of financial year:
- We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.If you have an account based pension, consider whether you need to adjust your pension payment strategy due to the cessation of the temporary reduction in minimum pension rates effective 1 July 2023. If the new minimum pension requirements are surplus to your needs, consider optimising the use of that surplus.
- If you have not fully utilised your Transfer Balance Cap (TBC), consider whether there is an opportunity to transfer additional amounts from accumulation phase (15% tax) to pension phase (0% tax) from 1 July 2023. This is particularly relevant as the general transfer balance cap (TBC) and total super balance (TSB) thresholds are set to receive a sizeable increase from 1 July 2023.
- If you think you’ll have a total super balance above $3 million on 30 June 2026, consider whether there is merit in taking action to limit the potential future impact of proposed changes. For example, actions to equalise account balances between members of a couple may assist in temporarily reducing or deferring the impact of the additional tax. Additionally, consideration could be given to the potential to invest in other tax effective options outside of superannuation.
- If you have significant income or capital gains consider your eligibility for claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Don’t miss out on saving up to 32% tax this financial year.
- If you are considering additional concessional contributions to super this year but may have a higher tax rate in future years, consider your eligibility for delaying extra contributions by carrying forward the concessional contribution cap and enjoying higher tax benefits in the future.
- If you have an existing salary sacrifice arrangement in place giving you total concessional contributions close to the annual cap ($27,500), review your salary sacrifice arrangements for the current year to ensure you don’t exceed the cap when your salary sacrifice contributions are combined with your employer SG super contributions. You might want to consider cancelling it entirely and instead making personal concessional contributions. However, thought needs to be given to the differences in work test requirements for the two contribution methods.
- If you have excess savings or investments that you don’t need access to before retirement, consider your eligibility for transferring this wealth into super. This may reduce tax paid and build your wealth for retirement.
- If your taxable income is less than $53,564 and you are working, consider your eligibility for making a personal non-concessional contributions to super. This may qualify you for a government-contribution of up to $500.
- If your spouse earns less than $40,000, consider your eligibility for making a non-concessional contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax. You may receive a tax offset of up to $540.
- If your spouse has less super than you, consider your eligilibity for splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).
- If you have an existing non-retirement phase income stream, give consideration to your eligibility to commence a retirement phase pension to obtain the tax-exempt status.
- If you are over age 55, and, you are considering the sale of your home, consider whether you are eligible to make use of the downsizer contribution cap. This may reduce tax paid and build your wealth for retirement.
- If you are between the ages of 67 and 74, consider your eligibility for making both concessional and non-concessional contributions. This may reduce tax paid and build your wealth for retirement.
Whilst these ideas might get you thinking, it is important to consider the full eligibility rules and the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.
This information has been prepared and issued by ITL Financial Planning and is current as at 10 May 2023. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.
Written by Shereen Churchill (Financial Adviser)
ITL Financial Planning and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. www.fortnum.com.au. Any information on this website is general advice only and does not take into account any person's objectives, financial situation or needs. Please consider your own circumstances and consider whether the advice is right for you before making a decision. Always obtain a Product Disclosure Statement (if applicable) to understand the full implications and risks relating to the product and consider the Statement before making any decision about whether to acquire the financial product.