Getting ready for Tax Time
As tax time nears, here are some things to think about to get the most out of this EOFY.
The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year.
Whether you’re nearing retirement, a high-income earner looking to reduce your taxable income, or you’re on a lower income and looking for ways to maximise your super contributions; there are a few things you can consider at tax time. Read this article to finish this financial year on the right foot.
Nearing retirement? Maximise your super contributions
If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account.
Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings.
The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction.
Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income.
Consider a one-off contribution to lower your income tax
Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14.
To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000.
Are you eligible for the Government co-contributions to super?
If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions.
Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account.
Taking advantage of Government co-contributions can be a great way to boost your superannuation savings, either for retirement or to save towards buying your first home.
Review your records now
It just wouldn’t be tax time without the fun of sorting through your receipts and documents. If you stay organised throughout the year, however, it doesn’t need to be a headache.
Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation?
Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time.
Looking for more help?
If you’re looking to maximise your tax return and get ready for a successful financial year ahead, talk to a financial adviser about your options.
It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible.
At Hejaz Financial Services, we have an expert team that comprises of Tax Financial Advisers, Tax Agents and Accountants. We can therefore advise and assist on matters relating to Tax Minimisation, Tax Strategy, and Investment Structuring. Learn more about our tax services here.