The Federal Budget is now behind us and the long boring election campaign is just getting started. For all the initiatives outlined in the Budget, they’re worth nothing if the Turnbull isn’t re-elected… and if they’re not there is no guarantee they’ll push ahead with what’s been announced.
There’s an old saying in politics, “do or saying anything to get elected and, when you are, then do whatever you like”. Cynical but true.
With that in mind the next 8 weeks is not just about the election but it’s also getting your affairs in order for the end of financial year.
With 30 June fast approaching, now’s a great time to turn over a new leaf. Here are our top tips to get your finances in shape for tax time.
Take advantage of superannuation concessions
End of financial year is a great time to focus on boosting super. Yes the Budget cracked down on the tax concessions for the rich, but for the rest of us it’s business as usual when it comes to superannuation.
For people earning a salary, it’s possible to “salary sacrifice” by making additional contributions from your pre-tax pay and reduce your overall tax liability. Self-employed individuals may be eligible for a tax deduction on their contributions too.
Alternatively, making an after-tax contribution to super means any returns from investing that money will be taxed at just 15 per cent within the fund.
Lower income earners can benefit from the government co-contribution, or if you have a low income earning spouse, you‘re able to make contributions on their behalf while receiving a corresponding tax offset.
Just keep in mind there are limits on how much you’re able to contribute in each situation.
Lastly, if retirement isn’t too far away, you may be eligible for a transition to retirement product. This is a tax effective way to reduce hours worked without reducing income, while still contributing to super.
How these strategies apply will depend on your personal situation, so talk to an adviser to make the most of your circumstances.
It’s common sense to review investment portfolios at tax time.
Any income from investments, like rent from a property or share dividends, is generally taxed at your marginal tax rate.
On the other hand, while capital gains from investments are technically taxed at your marginal rate, there are a number of ways to reduce the amount of tax you have to pay.
Holding an asset for more than 12 months means the taxable component of any capital gain is halved. And capital losses, where an investment is sold for less than its purchase price, can be used to offset capital gains and reduce your overall tax liability.
If you make a net capital loss in any given year (where losses outweigh gains), it will carry forward into future years and can be used to offset against future gains.
For people who have borrowed money to invest, say in shares or property, the interest payments on these loans are usually tax deductible too. It may be possible to pre-pay the interest for the upcoming year and bring forward the tax deduction to the current financial year.
Plan for the year ahead
The end of the financial year doesn’t have to be all about tax though, it’s also a great opportunity to get your financial ducks in a row.
Why not sit down and think about what you’re working towards, personally and financially, and work out the strategies you need to put in place to get there?
And while building assets and income is exciting, don’t forget the importance of appropriate insurance to protect you and your family in case the worst happens.
For people who’ve been toying with the idea of seeing a financial adviser, there’s no time like the present to actually do something about it.
There’s a lot of peace of mind to be had knowing your money is in professional hands, and research shows you’re likely to end up significantly better off in the long run.
GET THAT PAY RISE
Last week’s Federal Budget showed that wage increases over the next year are expected to slightly outpace cost of living price increases. It won’t be by much but at least it will be a “real” wage rise.
Whether that happens for you… is up to you. Generally bosses aren’t that forthcoming with decent pay increases unless you push for them.
Asking your boss for a pay rise is never easy, even for the most confident and high performing people. But the better you get at having this conversation, the better off you’ll be.
Research shows that not discussing pay with your employer can cost you as much as a million bucks over the course of your career.
So here’s how to get it right.
STEP 1: Book it in
Book in a formal meeting with the powers that be and make sure you’re prepared. This means you’re prepared to put your best case and they are forced to give it some thought beforehand.
Look up industry average wages, write down all your responsibilities and get a good feel for what you’re worth.
STEP 2: Pump up your tyres
If there’s a time and place to be a tall poppy, it’s here. Highlight your achievements, innovations and commitment to your role. Explain how you’ve gone that extra mile over the last year and how that has benefitted the organisation
Then focus on what you want to achieve for the business and how you see your responsibilities developing.
STEP 3: Agree on the next steps
Don’t leave that meeting without an agreement on next steps. Never be satisfied with a “leave it with me and I’ll think about it”. Push for a commitment.
If it’s a yes, when does the pay rise take effect from? If no, lock in a timeframe for another pay review, and document what you need to achieve to make the next outcome a positive one.