There are many benefits to reviewing your situation to take advantage of any financial planning opportunities that may be available to you before the end of the financial year. The key opportunities may be:
- Utilising super contributions caps
- Better managing tax, and
- Accessing government benefits
We’ve put together some of the really important areas and information you should be thinking about at this time of year.
Superannuation strategies
People wanting to maximise their super contributions caps and/or reduce their tax for the 2019/20 FY, must act before 30 June 2020.
Work test and the exemption
Individuals aged 65 – 74 can only make personal contributions to super if they meet the work test in the year the contribution is made. The work test involves being gainfully employed for 40 hours over a 30 consecutive day period.
A one-off exemption was introduced from 1 July 2019, whereby recent retirees with Total Super Balance (TSB) of $300,000 or less as at 30 June 2019, could make a personal super contribution before 30th June 2020 without needing to meet the work test this year. To qualify for this once in a lifetime work test exemption in the FY20, the individual must have last met the work test in the FY19.
Note: In addition to the above explained once in a lifetime work test exemption a new legislation was introduced in the Parliament this year proposing to increase the age from which the work test applies from age 65 to 67. However, this is not proposed to take effect until 1 July 2020.
Concessional Contributions
The FY20 Concessional Contributions Cap is $25,000, so a check should be made of how much has been contributed to super for the current FY, in the form of Concessional Contributions ("CC’s"). Concessional Contributions include super guarantee contributions, amounts salary sacrificed and personal contributions claimed as a tax deduction.
Unused CC’s from the FY19 can also be carried forward to this year for those with TSB of less than $500,000 as at 30 June, 2019. This means an opportunity exists for those eligible, to contribute any unused CC caps from both FY19 and FY20 before 30 June 2020 and take advantage of the tax deduction for the FY20.
Non-Concessional Contributions
The Non-Concessional Contributions (NCCs) Cap for FY20 is $100,000. These contributions are made with after tax monies.
For individuals below age 65 NCC’s can be brought forward over three years, so, up to $300,000 can be contributed before 30 June. However, those with TSB of between $1.4m and $1.6m on 30 June 2019 may need to be careful not to exceed the Cap as the full $300,000 is not available to these individuals.
Government Co-contributions
Individuals with assessable income of less than $53,563 this year who earn at least 10% of their income from employment or carrying on a business may benefit from the Government co-contribution of up to $500. To be eligible for the maximum co-contribution, their assessable income for FY20 must be less than $38,564 and they must contribute at least $1,000 before 30 June as a NCC. The amount of the co-contribution reduces as assessable income increases and cuts out when income exceeds $53,564.
More information and eligibility requirements can be accessed here.
Spouse contributions
Some couples may benefit from making a Spouse contribution and accessing the spouse tax offset of up to $540. To qualify for the spouse tax offset in the FY20, a spouse contribution must be made to the low-income earner spouse’s superannuation account before 30 June 2020. To be able to access the full amount of the spouse tax offset, the receiving spouse’s assessable income must be below $37,000 and the amount of the spouse contribution must be $3,000. Reduced offset may be available where receiving spouse’s income is between $37,000 and $40,000. The offset phases out at $40,000 pa or more.
Note: Spouse contributions are personal contributions for the receiving spouse and count towards their NCC cap.
More information about spouse contributions and eligibility requirements can be accessed here.
Strategies available outside of super
EOFY strategies available outside of super include pre-paying deductible expenses before 30 June. This includes:
Prepaying income protection premiums held outside of super – Individuals with higher assessable income this year may wish to pre-pay up to 12 months of income protection premiums before 30th June and claim a tax deduction for these amounts in the FY20.
Prepaying interest on investment loan – Similarly, prepaying up to 12 months of fixed rate interest on an investment loan before 30th June can reduce individuals taxable income for the FY20.
More information about prepaid expenses can be accessed here.
Notify Centrelink
Means test thresholds will be indexed as at 1 July, so it is worth assessing whether you may be eligible for any benefits with a rise in Assets or Income thresholds from 1 July, 2020. With the recent market downturn it is also timely to ensure your details are up to date with Centrelink to ensure maximum benefits are being received.
Similarly, aged care residents or individuals accessing home care packages need to update their Centrelink records to ensure accurate assessment is applied to their fees/charges.
COVID 19 and Government Relief
There is no doubt that this year has been extraordinarily different for us all. The circumstances produced by COVID 19 and its after effects have left many distressed, and in need of financial assistance. So we have put together a list of support resources that will hopefully assist you.
If you are still working but with reduced hours and income
If you’re still in a position to keep working, whether from home or at your place of work, your employer may have cut your hours, and your income as a result. The business that employs you may be under enough financial pressure to be considering redundancies in the future.
The new JobKeeper payment is designed to help businesses afford to keep their employees in the workforce. It provides a $1,500 per fortnight payment for each eligible employee to businesses who have been impacted by COVID-19. While these payments are being made to businesses, they must be passed on to eligible employees for the employer to be eligible for payments.
What this means:
If you’re still in employment and your employer is eligible, they can pay you a minimum of $1,500 per fortnight before tax until 27 September 2020. Payments can be backdated to 30 March 2020 if the business enrolled before 31 May 2020. Your employer may choose to pay you more than this amount if they can afford to do so.
Please ask us for a copy of the JobKeeper basic conditions information sheet.
If you’re still struggling to meet all your essential expenses from your JobKeeper payments or other income, early access to your super may be another option. This is another measure designed to provide financial relief to Australians experiencing hardship because of COVID-19.
What this means:
If you meet the financial hardship criteria, you can apply to withdraw up to $20,000 from your super tax-free: $10,000 before 30 June 2020 and a further $10,000 between 1 July to 24 September 2020.
Early withdrawal is available to people who are unemployed, have had their working hours/business income reduced by 20% or have been made redundant since 1 January 2020 or are receiving certain payments from Centrelink. Qualifying Centrelink payments include the Jobseeker payment, Parenting payment, Farm household allowance or the Special benefit.
Sole traders may also qualify for early access to super if their business was suspended or the annual turnover reduced by 20% or more since 1 January 2020.
Find out more: Early access to superannuation fact sheet.
You can apply for early access to your superannuation with the ATO via the MyGov website.
Access FPA Money and Life article "What you should consider before withdrawing your super"
If you are out of work
If you have been made redundant or lost your job, you could be eligible for a Jobseeker payment from Centrelink. Along with several other Centrelink payments, the Jobseeker payment has been increased to include a new time-limited Coronavirus supplement of $550 per fortnight, effective for six months from 27 April 2020. The Coronavirus supplement is also available to people receiving a number of other income support payments including the Youth Allowance and Parenting Payments (Partnered and Single).
Find out more: Income support for individual’s fact sheet. |
Visit the MyGov website to apply for the Jobseeker payment and other Centrelink benefits.
Economic Support Payments
The Federal government is also making two Economic Support payments to recipients of various other income support payments (including age pension, disability support payment, carer payment) and concession card holders (CSHC). The first payment of $750 has already been made with the second payment of $750 due in July 2020. Find out more: Payments to support household’s fact sheet
If you are Retired
But if you’re retired and not eligible for government benefits, you could still benefit from two other measures announced by the Government as part of their support for retirees.
There is a temporary reduction in minimum drawdown rates for account-based pensions and similar retirement income products. This means you can withdraw a smaller amount than would normally be required from your super assets in the 2019/20 and 2020/21 financial years. This can give you more flexibility in managing your super savings and income during this time.
The government has also reduced upper and lower social security deeming rates. Since 1 May 2020, the lower deeming rate is 0.25% with upper rate being 2.25%.
If you did not qualify for government benefits in the past because of the income test, or you’re receiving payments at a reduced rate, the reduction in the deeming rates could mean changes to your eligibility for Centrelink benefits under the income test.
We are all in this together
It is obvious that many of us are finding these times difficult, so we encourage you to reach out for support, as we are here to help and we are all in this together. In the interim, stay safe, keep healthy and take care of yourself, your family and your friends. If you need any extra help, information or just a chat, get in touch with us before June 30.
|
Plane Creek grower Stewart Borg said the ability to Target Price had given him greater control over his returns. “Without Target Pricing we lose the ability to forecast and forward budget for our business,” he said. "For us, the difference between having control of our business through Target Pricing is the difference between being in the red or the black. Target Pricing gives us full control of our business performance.”
p Store and Google Play Store. Alternatively, drop by the office and we’ll help you get set up.
mar Sugar Australia has launched a fun song with a serious message as the flagship of its 2020 cane train safety campaign. The catchy Train Brain Song urges people to look out for cane trains and to use their train brains, or risk ending up ‘flat out like a toad’.
