End of Year tax tips – 2020/21 Financial Year
The end of the financial year is fast approaching with only 4 weeks left. It is important you take any desired action as soon as possible to ensure there is sufficient time for processing the strategies that can help you minimise tax. While we are not Accountants, and this is general advice, we do have a list of strategies that we think are worthwhile considering.
Just remember these strategies may take some time to implement, so it’s good idea to get in touch to see if any are relevant to your personal circumstances as soon as possible.
Here are our top year-end tips to get you started:
Tip #1 - Boost your super before 30 June
With the changes that came into effect as at 1 July 2017 you are now able to make a super contribution from a personal bank account and claim it as a tax deduction. If you do so it is critical that you complete a notice of intent to claim the tax deduction before you lodge your 2020/21 tax return.
It is important to speak to us if you are considering making any additional contributions as various caps and rules apply. For example, the amount you can claim as a tax deduction, including your employer super contributions and possibly some insurance premiums, is capped at $25,000 this year.
Tip #2 - Top Up your spouse's super
If you make an after-tax contribution of up to $3,000 to your spouse’s super by 30 June 2021, you could receive a tax offset of up to $540 if their income is less than $37,000 for the 2020/21 financial year.
Tip #3 - Prepaying investment interest could reduce this year's tax
If you prepay interest on a tax-deductible investment loan, you will be able to claim the interest paid in advance during this financial year. Not all banks offer this so it is best to check with your lender or finance specialist.
Tip #4 - Prepaying income protection premiums could reduce this year’s tax
Protecting your income is important as it ensures you can maintain your quality of life and provide support for your loved ones, if you are unable to work at your full capacity due to sickness or injury. Income Protection can provide a regular monthly benefit to cover mortgage payments and other expenses while you recover. Typically, Income Protection can replace up to 75% of your monthly income.
If you have or are considering income protection insurance, you can prepay your premiums for up to 12 months. This may allow you to bring forward a tax deduction from the following year into the current year – potentially reducing your taxable income this financial year.
Tip #5 - Transferring your Life & TPD Insurance from your own name to super
In specific circumstances a 15% tax deduction on a Life and TPD insurance premium may be claimed if held or paid from a super fund.
If you are paying for Life and TPD insurance from a personal bank account this would be worth contacting us about.
Tip #6 - Small Business Owners Only
Pay tomorrow’s expenses today, including employee super contributions. With the extension of the instant asset write off and ensuring you pay employee super contributions before 30 June you can reduce your net profit and tax payable. For the instant asset write off, various caps and exclusions may apply depending on your business and asset purchased so it is important to seek tax advice in this area.
Please keep in mind these strategies are relevant for this financial year and some of the above strategies will vary for the next financial year. It may be appropriate to ask us for advice as to how some of these strategies may apply to you both in this financial year and future years.
Please contact us if you have any questions.
Kind regards,
The Coastline Private Wealth Team.
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Our mailing address is:
PO Box 2082
Churchlands WA 6018
