This update is the final instalment of our three part series which aims to provide you with an insight into what strategies you may wish to consider in the lead up to the 2015 end of financial year (EoFY). A lot of people leave their preparation until it is too late and even though you only have 11 days to go, perhaps now is the ideal time to start planning for next year.

If you feel that your finances could do with a shake-up before June 30 – this year or next – there are many tax-effective strategies that you and your financial planner can implement to ensure that the end of June runs as smoothly as possible.

Capital gains tax management

If you have a capital gains tax (CGT) liability this year, there are a few strategies that you could consider to reduce the impact. These can be complicated to undertake, so it recommended that you speak to your financial adviser for more information.

Use a capital loss to offset your tax

The timing of the sales of assets (such as shares) can greatly affect your tax position. If you sell an asset because they are no longer appropriate for your circumstances and incurring a capital loss, the capital losses can be offset against any capital gains you have realised throughout the financial year allowing you to manage your CGT liability. If you don’t have a capital gain to offset, unused losses can be carried forward to offset gains in future years.

Stay in it for the long-haul

If you have purchased assets (such as shares or managed funds) and they have risen in value, you might rethink selling them, otherwise, you may have to pay a lot of CGT. A way to trim CGT is to hold onto the investment for more than 12 months. For assets purchased after 20 September 1999, investors have been entitled to claim a 50 per cent discount on capital gains they make on assets held for longer than a year.

Delay any income

Thinking of selling off a profitable asset, such as shares or property? It may be worth deferring this sale until after
30 June 2015. In doing so, you will delay incurring CGT for another financial year. So while you will still need to pay the CGT eventually, freeing up short-term cash flow may be beneficial depending on your circumstances.

Consider different types of investment structures

Investing into different types of investment structures (such as insurance bonds or superannuation) can prove to be a tax-intelligent investment. The investment income within an insurance bond is taxed at a maximum rate of 30 per cent which provides a saving of 19.0 per cent for a high income earner (calculation: 49.0 per cent [including Medicare levy of 2.0% and the Temporary Budget Repair levy of 2.0%] – 30 per cent) and tax-free withdrawals after ten years. Insurance bonds offer a range of different opportunities from investing for children, wealth accumulation for high income earners to passing your wealth onto the next generation outside of your estate.

Claim your medical expenses

From 1 July 2013, those taxpayers who received the offset in their 2013/14 income tax assessment will continue to be eligible for the offset for the 2014/15 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold. These changes will not apply to all taxpayers – the offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019. Your Medicare financial tax statement will help you claim the offset in your tax return. The statement shows you how much you have paid for medical expenses and how much you have claimed back from Medicare.

Salary packaging

Salary packaging is also known as a salary sacrifice arrangement. It is where an employee agrees to forgo part of their salary or wages in return for the employer providing them with benefits of a similar value. For certain industries (such as medical profession, charities) or high income earners it can be an effective way to obtain tax savings, particularly if you are on the top marginal tax rate. Some of the most common items that can be salary
packaged include:

• superannuation
• motor vehicles
• expenses ‘otherwise deductible’ to the employee.

You should make sure any salary packaging agreement you get into has a positive outcome in after-tax terms. Employers are not required to offer salary packaging to employees and it is wise to ask your employer what benefits you can salary package and speak to your financial adviser or accountant about the opportunities.

If you would like to discuss any of the above points with one of the Adviser fp team, please CLICK HERE and one of our Financial Planners will be in touch within 24-hours.

This information is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. This information and certain references, where indicated, are taken from sources believed to be accurate and correct. To the extent permitted by the Law, Lonsdale, its representatives, officers and employees accept no liability for any person that relies upon the information contained herein.