Year-End Tax Planning – Using Your Superannuation Fund

The end of the financial year is fast approaching, meaning this is an important time to think about ways to reduce taxes for the 2013 financial year. The use of your superannuation fund is a great way to save money on tax, but it also bolsters your personal financial position, as the money you spend at tax time, stays with you for your retirement rather than spending on items you may not necessarily need.

Following is a couple of ideas why you should look at tipping into superannuation rather than spending in other areas to maximize you opportunities in the 2012 financial year:

Year-End Tax Planning - Using Your Superannuation Fund

  • The transitional contribution concession for those over 50 has now changed. As of the 1st July 2012, if you are over 50 and have more than $500,000 as a superannuation balance, your maximum contribution limit will be the same as those under 50 years, $25,000 p.a. If your balance is lower than $500K, you will still be able to contribute $50,000 p.a.

 

  • Because of this $500,000 balance limit for concessional contribution, you may wish to consider a “Contribution Split” to a spouse, where 85% of your prior year’s contribution can be allocated to your spouse. If this is done effectively, a member’s balance can reduce below $500,000 and thus add several years to the contribution concession.

 

  • With the share market currently below is previous high levels there is an opportunity to make in specie contributions of shares into your superannuation fund which you own personally. There will be Capital Gains Tax consequences in doing so, but there may be deductions available if you have not reached your contribution cap. The rules have changed at the 1st July 2012, where an off-market transfer of shares can no longer be made to a superannuation fund, but they now need to be transferred on the market. This does not mean that the transfer cannot be done.

 

  • The Small Business Entity accelerated depreciation concessions are being beefed up in the 2013 financial year, where a small business is able to claim a deduction for assets purchased up to the value of $6,500 rather than the current level of $1,000. It may be better to wait until after July 1 to purchase assets between the value of $1,000 and $6,500. The first $5,000 of a motor vehicle purchase will also be deductible in 2013, meaning it may be best to hold off on the purchase of a motor vehicle. The money you save in tax here can be put into super to further reduce your tax bill.

 

  • Contributions can be made on behalf of a spouse earning less than $10,800 in assessable income and reportable FBT to attract a tax offset of up to $540 in the personal return of the individual making the contribution (18% of the contribution up to $3,000).

 

  • Non-concessional contributions made by an individual earning less than $31,920 will be matched dollar for dollar by the government up to $1,000. These phases out by 3.3c in every dollar when the taxable income is between $31,290 and $61,290. For example a person on $45,000 who contribution $1,000 as a non-concessional contribution to super will receive a government co-contribution into their fund of $564.

Whilst providing a list of options you have at your fingertips, this is not an exhaustive list, and covers only some of the opportunities available to you. For those approaching or over 55 this can be coupled with some pension strategies to make it extremely effective. We will be covering pension strategies in another article.

These types of strategy are much simpler in a Self-Managed Superannuation Fund, as you have control over what happens within the fund. Some of these strategies will still work in your standard superannuation fund.For more information you can read here http://www.rogersonkenny.com.au/resources-rk/year-end-tax-planning-for-self-managed-super-funds