Your life as a mining and resources professional will always be busy but as the end of financial year (EoFY) approaches, it could be highly beneficial for you to stop and take stock of your financial situation, goals and objectives, and do any necessary fine-tuning before June 30. My EoFY planning tips for mining and resources professionals could help to not only reduce your tax bill, but also build and protect your wealth.
TIP #1: Contributing to super
Depending on your personal circumstances, it could be worthwhile contributing to superannuation if you are eligible to do so and you have not exceeded the relevant caps.
For 2018/19 the concessional contributions cap is $25,000 per annum, regardless of your age.
The concessional contributions cap generally includes employer contributions (Superannuation Guarantee, voluntary and salary sacrifice) and personal deductible contributions.
IN SUMMARY: Making concessional contributions to your superannuation could help you reduce your personal income tax and build wealth for retirement within a tax-effective environment and, if applicable, purchase your first home via the First Home Super Saver Scheme (FHSSS).
- The non-concessional contributions cap is $100,000 per annum. If you are under 65 in a financial year, you can use the ‘three-year bring forward rule’ to bring forward your next two years of non-concessional caps and make up to $300,000 of non-concessional contributions. If you are not under 65 in a financial year, the three-year bring forward rule ceases to be available unless you started a bring-forward period in a previous financial year and it’s still operational.
- Non-concessional contributions are not allowed if your total superannuation balance as at June 30 of the prior financial year was $1,600,000 or more (and the 3-year bring forward rule phases out from $1,400,000).
Please note: If the 3-year bring forward rule was triggered in 2016/17, and not fully utilised by 30 June 2017, then transitional rules apply.
The non-concessional contributions cap generally includes personal contributions not claimed as a tax deduction. This encompasses spouse contributions, but excludes the Government co-contribution, downsizer contributions and eligible contributions under the small business capital gains tax cap.
IN SUMMARY: Making non-concessional contributions to your superannuation won’t reduce your personal income tax but could help build wealth for retirement within a tax-effective environment (and, possibly help you purchase your first home).
Government co-contributions and spouse contributions
In addition, there are a number of other advantages that you may be able to use depending on your situation. This includes:
- Receiving a co-contribution of up to $500 from the Government if you make non-concessional contributions to your superannuation
- Receiving a tax offset claim of up to $540 if you make non-concessional contributions to your spouse’s superannuation
TIP #2: Managing capital gains/losses
Depending on your personal circumstances, it could be worthwhile deferring (or bringing forward) the sale of an asset with an expected capital gain (and the applicable capital gains tax liability) to a future financial year. This could be beneficial if you expect that your income will be lower in the future compared to this year (or higher next year).
It is important to consider that if you defer the sale of an asset until it has been held for 12 months or more, you may be entitled to the 50% capital gains tax discount. In contrast, if you hold an asset for under 12 months, any capital gain made may be assessed in its entirety upon the sale.
In addition, if you have triggered a capital gain this year, you could review whether it‘s appropriate to offset this capital gain using an existing capital loss (carried forward or otherwise) or selling another asset currently in a loss position.
IN SUMMARY: The deferring or bringing forward of the sale of an asset with an expected capital gain, and considering options for offsetting a capital gain, could help reduce your personal income tax.
TIP #3: Prepaying deductible interest or bringing forward deductible expenses
Depending on your personal circumstances, it could be worthwhile prepaying deductible interest or bringing forward deductible expenses if you expect that your income will be lower next financial year.
This strategy may be applicable to your income protection insurance premiums; interest payments on investment loans ; donations to charities endorsed by the ATO as ‘deductible gift recipients’ (DGRs); work-related expenses (such as for car, travel, clothing and self-education); and in some circumstances, the cost of maintenance of investment properties.
IN SUMMARY: Prepaying deductible interest or bringing forward deductible expenses could help reduce your personal income tax, fund further philanthropic endeavours and protect wealth.
Your next step…
With June 30 on the horizon, it’s best not to leave your fine-tuning to the last minute. For help with an assessment of which EoFY planning tips may be appropriate for you, based on your financial situation, goals and objectives, please contact James on (07) 3007 2000 or email firstname.lastname@example.org
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in mining and resources.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.