Less than 4 weeks until end of financial year! I don’t doubt that for some the days are being counted down to what may be the end of another 12 months of forced saving – the result being a tax return lodged on July 1st for a refund that may swiftly follow!
Apart from a bonus in the bank account, the end of financial year normally also means that there is going to be a change in tax rates, Centrelink thresholds or government payments and this year is no different.
There are a number of areas that can be addressed before end of financial year and we will share some tips to help take advantage of benefits available.
Net Medical Expenses Tax Offset (NMETO)
There were a number of (we think) less than desirable 2013 Federal Budget announcements this year, the phase out of the NMETO is one of them. The government announced a phase out of this scheme where a tax rebate is paid where eligible net medical expenses exceed $2,120 (this financial year). This scheme will be phased out from 1st July. Those who are eligible and receive the NMETO rebate this year will be allowed to claim it next year. Those who are not, will no longer have access to this rebate. What does this mean? Consider bringing forward any medical expenses to before June 30. Basically any medical expense apart from cosmetic is eligible. There is no upper limit and depending on income, either 20% or 10% of those costs are rebated. Tax rebates are fantastic and if you can remain eligible for an expense that you may otherwise spend, then getting a refund for that expense is handy!
Every year the government gives away free money! Yep, free money! If you earn under $31,920 the government will give you (actually your super fund – but is still your money) 50c for every dollar you contribute up to a $500 co-contribution. If you earn under this threshold and not taking advantage of this then you must hate money! You need to meet some fairly simple criteria to be eligible; however it is a powerful way to build future retirement savings. Individuals are eligible for this every year. Let me give an example – If you contribute $1,000 per year for 30 years, at 7% return you’ll have an extra $101,000, add the full government co-contribution and you’ll have another $50,000 on top.
For those that we still see breaching the contributions caps (being on the top tax rate isn’t always an excuse!), if your over the age of 60 – your concessional cap will increase from $25,000 to $35,000 next year. So if you intend to go over – consider waiting until July 1st.
Need to buy business assets? Buy them! The instant asset write-off has increased from $1,000 to $6,500. What does mean? You can claim an instant write off for unlimited business assets that cost less than $6,500 (they need to be depreciating assets and business related – no new flat screens TV’s for the lounge room!). Vehicles purchased this year can be depreciated quicker so if you are considering a vehicle, talk to your tax agent and consider it sooner than later!
Looking for a tax deduction that also offers financial security? Income Protection is a tax deductible policy that replaces up to 75% of your income should you be unable to work due to an illness or injury. Being a tax deduction, the government is basically giving you a discount to obtain an insurance policy that keeps you and your family able to pay your bills if you lose the ability to earn an income. We process Income Protection claims for clients every month and in some cases for clients who have not worked been able to work for years. If you lost your income – who would pay your bills? Look to pre-pay your next year’s premium or compare your Income Protection policy options.
End of Financial Year Tips – What else is happening soon?
Self Education Expenses
Self Education Expenses are changing too. Currently there is no limit on eligible self-education expenses that can be claimed as a deduction. From July 1st 2014, there will be a limit of $2,000 per person per financial year. Education is not cheap and isn’t normally completed quickly! If you are considering entering education or currently in education, look to bring forward the enrolment or expense if it is expected to cost more than $2,000 per annum.
For those at university, the HECS/HELP discount for upfront payments (of 10%) and the voluntary repayment bonus of 5% is ending on the 1st January 2014. If you pay upfront or voluntarily, keep New Year’s Day in mind!
No major end of financial year tips for you, however some big things are happening from 1st July 2014. If you are thinking of selling your family home next year, consider waiting… we will provide some more information on this soon.
End of financial year is a busy time of year for most, but a quick call to your accountant, tax agent, bookkeeper or financial adviser can help you make the most of available benefits before the cut off and can keep you in the loop of pending changes. Don’t leave it to the last minute. The 30th of June this year is a Sunday – to ensure that contributions and pre-payments are received before the 30th, we suggest finalising everything by Monday the 24th – the earlier the better to avoid the last day rush!
End of Financial Year Planning is best handled by a taxation and/or financial professional. Before acting on any information you need to discuss your situation with your accountant or financial adviser to assess your needs.
About the Author – Benjamin Irons
Benjamin has been involved in the financial services industry since 2004. Benjamin has a Bachelor in Business, Diploma of Financial Services (Financial Planning). Previously a Financial Adviser and a business owner, Benjamin has worked with hundreds of individuals and businesses to implement simple strategies to improve wealth. Benjamin writes for a number of websites to assist people take control of their finances and find their financial freedom!