Grow Magazine

Your end-of-financial-year checklist

2 June 2017

Alan Hartstein details what you can do to get your tax affairs in order by July 1.

It's crunch time for sorting your tax affairs. You've got a few weeks left to understand what you need to do and get it done.

While everyone’s list of what they need to consider will be different, most should cover the following:

  • income
  • deductions
  • superannuation
  • investments (such as property and shares).

Decide your priorities

The most obvious place to start is with last year’s tax return and to consider how your situation has changed, if at all. You can file your return for the 2016-17 financial year from July 1, 2017.

Fortify Financial managing director Glen James believes a good starting point is to think of any big-ticket events that occurred during the year such as the sale or purchase of an investment property or shares or starting a business.

Your tax priorities depend on your life stage, wealth level, investments and working life.

Example 1: If you are nearing retirement -- or are about to take maternity leave -- and know your income will fall considerably next year, you may want to offset some of your income (such as capital gains from selling shares or an investment property) until next year when you may not be liable for as much tax on income.

Example 2: If, for the first time, your income has exceeded $90,000 (as a single) or $180,000 (as a couple or single with children), you might consider taking out private health insurance to offset the increase in the Medicare Levy Surcharge you may be liable for.

Deductions

The Australian Taxation Office has a full list of deductions on its website, some of which you can pay now, such as premiums on income-protection insurance, and some expenses you may want to bring forward so you can claim on your tax, such as computers that you use for work.

There are often good reasons to prepay interest for 12 months on investment loans or to bring forward expenses into the current financial year where possible, says ANZ technical services manager Rahul Singh.

“If, for example, you have a loan of $300,000 for property or shares that attracts annual interest of $15,000 and you know your income for this year will be much bigger than next year’s, you can pay that interest in advance and gain a higher deduction this year. This is particularly applicable for those retiring, moving to part-time work or having children,” he says.

James believes it’s essential to have a list of deductible items and corresponding documents ready for June 30. This may include:

  • items purchased for work
  • income and health insurance
  • investment-properties (depreciation schedules or maintenance bills)
  • details of share dividends
  • end-of-year bank statements.

“Remember, do yourself a favour for next year and keep this list,” James says.

Superannuation is changing

The rules governing super and the way you can use it to reduce your taxable income will change significantly on July 1, 2017.

·         Read a detailed account of the impending super changes at Super Insights.

With only weeks left to June 30, Omniwealth Services senior financial planner Andrew Zbik believes people should focus on these super changes.

“This will be the last financial year that you can contribute $35,000 as a concessional contribution if aged over 50 or $30,000 if aged under 50,” he says. “If you have contributed well under your concessional contributions cap so far, you may consider asking your payroll to contribute part, or all, of your June wage into your super fund to maximise your benefit.”

Singh agrees you should look to contribute as much as possible before June 30, though he does recommend seeing an adviser if you’re unsure how the changes affect you.

“Super rules are complex and what the rules mean to you depends on your circumstances. Speaking to an expert is always a good idea and financial advisers will help you maximise your opportunities.”

Super, property and shares

There are often changes to tax and superannuation law and this year is no different.

For example, the government is proposing to allow first-home buyers to salary sacrifice (or make tax-deductible super contributions) up to $15,000 a year ($30,000 in total) to their super from July 1, 2017, which they can then access from July 1, 2018 as a one-off deposit towards buying a first home. 

Further changes in this year’s federal budget mean investors can no longer claim travel deductions to inspect, maintain or collect rent on their rental property after July 1, when the rule comes into effect, so you might want to travel before then if you need to do these things.

Zbik says that when people sell a property they often don’t realise the day contracts are exchanged is when the sale is considered to have taken place for capital-gains tax calculation, not the settlement date (which could fall under next financial year). You may therefore need to figure that information into this financial year’s figures.

Singh believes that, when it comes to selling shares, or property, you should treat it like a thoughtful investment decision, not just as a means for making a capital gain or loss.

However, if you are looking at a large capital gain and you have a dud share you can easily offload, it’s always a good idea to at least consider selling out to offset against the gains.