Smart EOFY Strategies
Provide insightful strategies for maximizing tax concessions and investment opportunities as the end of financial year approaches. Covering super contributions, tax deductions, co-contributions, and more.
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Presentation Transcript
Smart EOFY Strategies For 30 June 2016 A presentation to Client Name Date Presented by Firstname Surname Jobtitle/Position
Disclaimer Important information This information is published by MLC Limited (ABN 90 000 000 402), 105 153 Miller Street North Sydney, NSW, 2060, a member of the National Australia Group of companies. It is intended to provide general information only and does not take into account any particular person s objectives, financial situation or needs. Because of this, you should, before acting on any information in this document, speak to a financial adviser and/or taxation professional so they can help you assess which year-end strategies suit you best. MLC is not a registered tax agent. If you wish to rely on this information to determine your personal tax obligations you should consult with a Registered Tax Agent. The tax estimates provided in this presentation are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. 2 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Notice Unless stated otherwise this presentation does not take into account any of the measures announced in the 2016 Federal Budget that has a proposed implementation date in future financial years. SMART EOFY STRATEGIES FOR 30 JUNE 2016 3
Agenda Why invest via super? Super strategies Insurance Other tax-effective year-end opportunities How I can help? SMART EOFY STRATEGIES FOR 30 JUNE 2016 4
Why invest via super? Tax concessions every step of the way 1. When you contribute to super, you could potentially Make contributions from pre-tax salary Claim contributions as a tax deduction Get a Government co-contribution of up to $500 Get a tax offset of up to $540 Now Retirement SMART EOFY STRATEGIES FOR 30 JUNE 2016 5
Why invest via super? Tax concessions every step of the way Now Retirement 2. While build up super Earnings in fund taxed at maximum of 15% Earnings from investments in own name taxed at up to 491% 1Includes a Medicare levy of 2% and the temporary Budget Repair levy of 2%. 6 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Why invest via super? Tax concessions every step of the way Now Retirement 3. When using super to pay pension No tax on investment earnings Tax offset between preservation age1and 592 Tax-free income at 60+ 1Your preservation age ranges from age 55 to age 60 depending on your date of birth. 2 Assuming no untaxed element 7 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Super EOFY strategies For middle to higher income earners under preservation age Get more from your salary or bonus are an employee If you salary sacrifice contribute pre-tax salary or bonus into super You may want to benefit from contribution taxed at max. 15%, (or 30% for people whose earnings and contributions are more than $300k+ p.a.) not marginal rate which is up to 49% grow retirement savings reduce tax payable on salary or bonus by up to 34% So you can potentially You can only sacrifice prospective salary or a bonus into super (i.e. income to which you are not already entitled) and need to make an effective salary sacrifice agreement with your employer. 8 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Salary sacrifice case study William is aged 45 About to receive a $5,000 pa salary increase Will bring his total salary to $100,000 pa Considering salary sacrificing this additional $5,000 into super SMART EOFY STRATEGIES FOR 30 JUNE 2016 9
Salary sacrifice case study Sacrifice pay rise into super $5,000 (N/A) Receive pay rise as after-tax salary $5,000 ($1,950) Per annum Pre-tax pay rise Less income tax at 39%1 Less tax on super contribution Net amount invested Tax paid on earnings ($750) (N/A) $4,250 15% $3,050 39% 1Includes a Medicare levy of 2%. 10 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Results (after 20 years) $179,544 $200,000 $160,000 + $55,814 $123,730 $120,000 $80,000 $40,000 $0 Receive pay rise as after-tax salary and invest outside super Salary sacrifice pay rise into super Assumptions:. A 20 year comparison based on $5,000 pa of pre-tax salary. Both the super and non-super investments earn a total pre-tax return of 7.74% pa (split 3.68% income and 4.06% growth). Investment income is franked at 28.55%. All values are after income tax (at 15% in super and 39% outside super including Medicare Levy) and CGT (including discounting). Note: No lump sum tax is payable on the super investment as William will be over 60 assuming no untaxed element SMART EOFY STRATEGIES FOR 30 JUNE 2016 11
Super EOFY strategies Make tax deductible super contributions are self-employed or not employed If you make personal super contributions You may want to claim some (or all) of contribution as tax deduction grow retirement savings use deduction to reduce taxable income and income tax payable So you can potentially To be able to claim a portion of your personal super contributions as a tax deduction, you need to be eligible and complete a valid notice of intent form and give it to your super fund within specific timeframes. You also need to get an acknowledgement back from your super fund that the notice has been received and accepted by them. If you don t you will not be able to claim a deduction. (You also need to be eligible to make a contribution). 12 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Consider contribution caps Salary sacrifice and personal deductible contributions count, along with other amounts, to concessional contribution (CC) cap The concessional cap is $30,000 in 2015/16* The caps are annual amount and you can t carry forward any unused amount to another financial year It s really important you make the most of the cap each year, particularly if you are approaching retirement People who earn in excess of $300K pay an additional 15% tax on concessional contributions made over the $300K threshold and within the cap * For people aged 48 or under on 30/6/15 the cap is $30,000 and $35,000 for people aged 49 or over on 30/6/15. 13 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Cap implications Excess concessional contributions for the 2015/16 financial year are taxed at their marginal tax rate (MTR). An Excess Concessional Contributions Charge will also be applied by the ATO. May elect to withdraw up to 85% of your excess concessional contributions from your superannuation fund to help pay your income tax assessment when you have excess concessional contributions. Review this year s contributions and remember that a range of other items count towards this cap, including: super guarantee contributions, including those from more than one employer concessional contributions made to fund insurance in super, and contributions you claim as a tax deduction Review your contributions in the months leading up to 30 June, particularly if you had or likely to receive a pay increase or bonus which requires additional superannuation contributions to be made. 14 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Super EOFY strategies Get a super top up from the Government earn at least 10% of income from employment or self-employment; earn a total income of less than $50,454; and satisfy other eligibility criteria make personal after-tax contributions If you You may want to get up to $500 in free super from Government spouse may qualify for co-contributions if you earn too much So you can potentially 15 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Co-contribution case study Ryan is aged 40 Employed on salary of $37,000 pa Wants to invest $1,000 in after tax salary each year until he retires at 60 16 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Co-contribution case study Make personal super contribution $1,000 $449 $1,449 15% In 2015/16 Invest outside super Amount invested Co-contribution Total investment Tax paid on earnings $1,000 $0 $1,000 34.5%1 1Includes a Medicare levy of 2%. 17 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Results (after 20 years) $100,000 $78,438 $80,000 $60,000 $43,816 + $34,622 $40,000 $20,000 $0 $1,000 pa invested outside super (no co-contribution) $1,000 pa invested inside super (includes co-contribution) Assumptions:. A 20 year comparison based on an after-tax investment of $1,000 pa. Both the super and non-super investments earn a total pre-tax return of 7.74% pa (split 3.68% income and 4.06% growth). Investment income is franked at 28.55%. All values are after income tax (at 15% in super and 34.5% outside super including Medicare Levy) and CGT (including discounting). Note: No lump sum tax is payable on the super investment as Ryan will be 60 at the end of the investment period assuming no untaxed element.. 18 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Super EOFY strategies Boost partner s super and reduce your tax For people who have a spouse who earns less than $13,800 pa Make after-tax super contribution on their behalf Potentially receive tax offset of up to $540 Grow spouse s super and reduce your tax 19 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Other super EOFY strategies Make insurance more affordable Buy life and total and permanent disability insurance in super Claim super contributions as tax deduction Self-employed Buy insurance in super with pre-tax dollars Employee Eligible for co-contribution Use co-contribution to help pay for future insurance Concessions can: Make it more affordable to insure through super, or Enable you to purchase a higher level of cover 20 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Other smart EOFY opportunities Pre-pay expenses If you want to manage your cashflow more efficiently, you could: Pre-pay annual premiums for an income protection policy held in your own name Pre-pay up to 12 months interest on an investment loan (usually only available with fixed rate facilities) 21 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Other super EOFY strategies Make after tax contributions to super You may want to: Cash out non-super investment Make personal super contribution As a result, you could: Have earnings in super fund taxed at max. rate of 15% (or 30% for people whose earnings and contributions are more than $300k+ p.a.) Earnings from investment held in own name taxed at up to 49%1 Reduce tax on investment earnings by up to 34% 1Includes a Medicare levy of 2% and the Temporary Budget Repair levy of 2% The Government announced in the 2016 Federal Budget that a lifetime cap on non-concessional contributions (NCCs) of $500,000 will apply to individuals from 7.30 pm on 3 May 2016. Before you make any non-concessional contributions you should speak to your financial adviser to assess any impact this proposal could have for you. 22 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Other smart EOFY strategies Manage CGT If you make a capital gain on asset sales this financial year, consider: making a super contribution and claiming amount as tax deduction (if eligible) If you have received a capital loss from your investments, consider: utilising the capital loss against any capital gains, so you can manage your tax on your investments more efficiently 23 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Strategy wrap-up Before June 30 After June 30 Super strategies Salary sacrifice contributions Personal deductible contributions Co-contributions Spouse contributions Key issues to consider Review concessional contributions Review TTR strategy Make the most of your tax refund Insurance strategies Buy insurance in super Pre-pay deductible expenses Other smart opportunities Make after-tax contributions Manage CGT Start planning for EOFY 2016/17 now 24 SMART EOFY STRATEGIES FOR 30 JUNE 2016
How I can help? Note to adviser: Optional slide(s)- e.g. relevant content regarding your advice services and how people can make an appointment. 25 SMART EOFY STRATEGIES FOR 30 JUNE 2016
Thank you Contact details line 1 Contact details line 2 MLC Limited ABN 90 000 000 402 AFSL 230694. Part of the National Australia Bank Group of Companies.
