Tax planning before the end of 2021 Financial Year

Tax planning before the end of 2021 Financial Year

Income Protection Insurance

Income protection, also known as ‘salary continuance insurance’ or ‘disability income insurance’, insures one of your most important assets, your income. It’s designed to pay you a benefit if you are unable to work for a period of time due to illness or injury. When this insurance is purchased outside of your superannuation, the premium you pay might be tax deductible. Currently, you can insure up to 75% of your gross income. Either you want to top up your existing income protection cover or willing to apply for a new income protection policy, we encourage you to reach out to your financial adviser to discuss the options available to you.

Superannuation Contributions (Tax Concessions)

1.Claiming tax deductions for personal super contributions

Regardless of you are self-employed or an employee, you can make before tax contributions into your super fund in addition to your business or employer’s contributions for the income year in which you can claim a tax deduction. Total amount of your and your employer’s contribution for concessionally taxed amount for 2021 Financial Year must be maximum $25,000. This amount will increase to $27,500 from July 2021. Let’s say your employer has made $15,600 contribution into your superannuation as a Super Guarantee Contribution in this year. So, you are entitled to make $9,400 contributions1, and claim tax deduction when you complete your tax return, and inform your super fund of the type of contribution it was by sending them notice of intent to claim a tax deduction. Your contribution into your superannuation will then be taxed at 15% instead of your marginal tax rate which in general is much higher than 15%.

2.Suppose Contributions

Where you make a spouse contribution2 into your spouse superannuation before the end of any given financial year, you, as a contributing suppose is eligible to claim a tax offset in respect of the spouse contribution if you and your spouse meets the required conditions. By doing so, when contributing spouse reduces their tax obligations, the receiving supposes retirement savings will grow.

3.Government Co-contribution

The Government co-contribution involves the Government contributing to the super accounts of low to middle income employees and self-employed people to assist them to save for their retirement. The maximum Government co-contribution is 50 cents for every $1 of eligible personal super contributions made in a financial year and is subject to an income test3. The contribution amount needs to be non- concessional (after tax) contribution in order to benefit from the government co- contribution.

4.Low Income Superannuation Tax Offset

If an individual is a low-income earner with adjusted taxable income4 of $37,000 for 2021 financial year, and makes any concessional (taxed at 15% tax rate instead of their marginal tax rate on the contributed amount), the Government returns the 15% tax paid on the concessional contributions into their super fund.

Business Tax Incentive

Businesses with a turnover up to $5 billion are able to deduct the full cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets.

This is very complicated area, so we encourage you to contact for a professional advisor for guidance.

2 There are contribution eligibility requirements that must be satisfied in order to benefit from this contribution type.

3 The person may want to benefit from this need to check their eligibility for the government co-contribution, so we encourage you to reach out to a professional advisor to see if you are eligible for it or not.

An individual’s adjustable income might be higher than the assessable income. Prior to any action we encourage you to reach out to us to see if you are eligible for this benefit or not.

DISCLAIMERS
This document has been prepared by HQ Financial Solutions, an Authorized Representative of Lifespan Financial Planning Pty Ltd ABN 23 065 921 735,AFSL No.229892 based on providing for information purpose only. Accordingly, reliance should not be placed on this material as the basis for making an investment, financial or other decision. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), to the maximum extent permitted by law, no person including HQ Financial Solutions, Halle Yilmaz or Lifespan Financial Planning Pty Ltd, accepts responsibility for any loss suffered by any person arising from reliance on this information. Before acting on this material, you should consider its appropriateness, having regard to your financial circumstances and needs, and whether those changes may ,may not be made law, and  talked to a specialist in that field.

Halle Yilmaz is a financial adviser and business consultant. As a financial adviser, she gives solid advice that can create rapid and lasting results for her clients. Sign up for her free E-Book and download “7 Steps to Healthy Wealth Management.”