The Australian share market was weaker in May, with the All Ordinaries index closing the month 3.1% lower at 5,761.3 points. The Australian Dollar fell by 0.8% in May, with 1 Australian Dollar currently buying 74.26 US cents. Once again, the Reserve Bank of Australia left the official Cash Rate on hold at 1.50% per annum.
Global share markets provided positive returns in May. The United States Dow Jones index gained 0.3%, the London FTSE gained 4.4%, the Japan Nikkei 225 gained 2.4% and the Hong Kong Hang Seng Index gained 4.2% for the month.
With the end of financial year now only 30 days away, noted below are four simple strategies to consider:
1. Utilise the Federal Government Co-Contribution Scheme
The Federal Government Co-Contribution Scheme helps boost the superannuation balance of low and middle income earners.
Under the scheme, subject to meeting the eligibility criteria, the Federal Government will add a maximum of $0.50 for every $1.00 of your 'own funds' that you contribute into superannuation (up to a maximum payment of $500).
To be eligible for the superannuation co-contribution, you must satisfy the following requirements:
- Be eligible to contribute to superannuation and be aged less than 71 at the end of the relevant financial year;
- Make a personal non-concessional (or after tax) contribution to a complying superannuation fund by 30 June;
- Earn 10% or more of your total income from carrying on a business, eligible employment or a combination of both;
- Have total income less than the upper income threshold (refer below);
- Lodge a tax return for the relevant year (including completing the 'Super Co-contributions workbook'); and
- Not hold a temporary resident visa at any time during the financial year (some exceptions apply).
The maximum payment of $500 applies to persons who have total income of $36,021 or less.
The maximum payment then reduces by 3.333 cents for every dollar of total income, less allowable business deductions, over $36,021 before reducing to nil at $51,021.
2. Make A 'Spouse' Superannuation Contribution
Spouse contributions help build up the superannuation savings of the receiving spouse who has low (or no) income.
Spouse contributions involve an individual (the contributing spouse) contributing 'after-tax' money directly into a superannuation account for the benefit of their spouse (the receiving spouse).
Where the receiving spouse is a low income earner, the contributing spouse may be entitled to a non-refundable tax offset of up to $540 (when making a minimum spouse contribution of $3,000).
To be eligible for the maximum spouse contribution tax offset the receiving spouse's assessable income, reportable fringe benefits and reportable employer superannuation contributions must be less than $10,800 in a financial year.
In addition, age restrictions apply to the receiving spouse (i.e. generally the receiving spouse must be under 65 years of age).
The contributing spouse claims the spouse contribution tax offset when submitting their tax return.
3. Prepay Interest
For those individuals with investment loans (e.g. investment property or investment portfolio loans), it may be possible to prepay 12 months' interest on your investment loans. In doing so, you have the ability to bring-forward your next financial years' interest deduction into this financial year.
This strategy may be relevant if you think that your level of assessable income may reduce next financial year, or you have prepaid interest in the past and still wish to receive an interest deduction this financial year.
Please note that when prepaying interest, you generally must have a fixed rate loan. Also, if you need to repay this loan within the fixed rate term there are often penalties and you may forgo any interest prepaid.
4. Maximise 'Concessional Contributions' To Superannuation
For those self-employed persons, it may be possible to make a 'tax-deductible' contribution to superannuation prior to 30 June.
The limits that apply to tax-deductible (or concessional) contributions to superannuation in the 2016/17 financial year are $30,000 for persons aged under 50 years of age, and $35,000 for persons aged 50 and above.
Please note that the concessional contribution limit includes any employer Superannuation Guarantee (i.e. the 9.5%) payments that you may have received within the financial year. Please also note that the concessional contribution limit reduces to $25,000 per financial year for all people on 1 July 2017.
For more information, please contact Ryan Love or Michael Clapham on 1300 856 338.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.