With June 30 fast approaching you should consider whether any of the below strategies are appropriate for you:

Concessional Contributions

There are limits on the level of concessional contributions that can be made each year. The current limit is $25,000 unless you’re 50 or older, in which case your limit is $50,000. Amounts contributed above these limits will be taxed at an additional 31.5% and will count towards your non-concessional contribution limits

Salary Sacrifice

Salary sacrificing involves diverting pre-tax dollars from your employment salary into a range of benefits. One form of salary sacrificing is making pre-tax contributions into your super account. The benefits of this include increasing your super balance, and potentially reducing your tax liability.

Instead of paying tax at your marginal rate, the amount you salary sacrifice becomes a taxable contribution received by the fund. The contribution (plus any income earned on the investment) is generally taxed at a maximum rate of 15%.

Salary sacrificing is normally available to most employees, however because it is employer specific, you’ll need to check that your employer allows you to do so prior to arranging.

Personal Deductible Contributions

By making a personal deductible contribution to super, you can reduce your taxable income and therefore decrease your personal tax liability. If you’ve sold an asset during the financial year and realised a significant capital gain, you may also be able to offset any personal income tax that would have been payable on the capital gain. If you’re self-employed, substantially self-employed, or under 65 and recently retired, you may be eligible to make a personal deductible super contribution.

Make a contribution to your dependant spouse’s superannuation account

Consider making a contribution to your dependant spouse’s superannuation, which could provide you with a tax offset. If your spouse’s assessable income (including reportable fringe benefits and reportable employer super contributions) is less than $13,800 and you make a contribution to your spouse’s super fund, you may be entitled to receive a tax offset. If eligible, this strategy results in a direct saving against your income tax liability.

You may benefit from this strategy if you have a spouse on a low income and want to boost your partner’s super savings whilst reducing your own tax liability.

Non-Concessional Contributions

There is a cap on non-concessional contributions of $150,000 per year. If you are under 65, you can contribute up to $450,000 in the current year using the ‘bring forward’ provision, although this limits how much you can contribute in the following two years. Any contribution you make over your relevant cap is taxed at 46.5%.

Government Co-Contribution

The government co-contribution is where you make a personal contribution to super and the government matches your contribution on a dollar-for-dollar basis, up to a maximum of $1,000. This amount reduces by 3.333 cents for every dollar your total income, less allowable business deductions, is over $31,920, up to $61,920.

To qualify for the co-contribution, your total income (including assessable income, reportable fringe benefits and amounts salary sacrificed to super) must be less than $61,920 and 10% or more of your total income must be from eligible employment, running a business or both. In addition you must be under the age of 71 at the end of the financial year and have lodged a tax return.

Use losses to reduce Capital Gains Tax

By selling a poor performing asset before June 30, you can use the capital loss incurred to offset a realised capital gain from another asset in the same financial year ( including capital gains received as part of a managed fund distribution). By creating this capital loss, you may reduce (or eliminate) your CGT liability and use these funds for more appropriate investment opportunities in the future.

Defer asset sales to manage Capital Gains Tax

If you expect to earn a lower taxable income next financial year, it may be beneficial to defer the sale of any CGT assets until the 01 July 2011. This will result in a reduction in your marginal tax rate and therefore a tax saving. In addition, by selling an asset after 30 June 2011, you may be able to delay paying tax on your capital gain until your 2012 tax return.

Bringing forward any relevant tax deductions

You could consider bringing forward any relevant tax deductions into the current financial year. What this does is effectively lower your taxable income and therefore the amount of tax that you would otherwise pay.

For individuals, self-employed or small business owners, this might mean pre-paying the interest on your investment property loan, margin loan or repairs on a rental property. Another example may include, prepaying income-protection insurance premiums ahead of 30 June.

Pre-pay 12 months interest on investment loans

If you’ve already commenced a gearing strategy (or you’re about to set one up), then  pre-paying your interest bill for up to 12 months before 30 June may enable you to bring forward your tax deduction and pay less income tax this financial year. This expense would otherwise be tax-deductible in the following financial year.

This works quite effectively when your income is variable, and in particular, if your income in the current year is expected to be higher than income in subsequent years. In addition, pre-payment provides you with certainty about your interest rate position for the next 12 months, and could shield you from further rate rises in 2011/2012.

Pre-pay 12 months income protection insurance premiums

If you pre-pay your income protection insurance premiums for 12 months before 30 June, you can bring forward an expense that would otherwise be tax-deductible in the following financial year. This additional tax deduction could help you to minimise your taxable income and result in significant tax savings

Important Note:

There are restrictions and eligibility criteria for some of these strategies, so if you’d like to find out more about how they might relate to your personal circumstances, please call the office on (08) 9316 3050 to arrange a suitable time for an appointment or to discuss further. By doing so, we’ll assist in explaining the strategies in detail and help you decide whether any are appropriate for you. We’ll also ensure everything is in place before the 30 June deadline.

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.