- Five Ways To Celebrate The End Of The Financial Year - May 28, 2020
30 June is not exactly a big day of celebration for those outside of the finance world. But for those in the finance world, it is bigger than Christmas! And like Christmas, you either feel incredibly excited or an impending sense of doom.
For financial planners like myself, most of them will feel incredibly excited. May and June are traditionally the busiest times for financial planners getting everything sorted before the due date, then in July when things are quiet we head north for our annual defrosting (perhaps not this year though…)
For accountants though, all they can think about is how much overtime they are going to do from July to September getting everyone’s tax returns done! Accountants look forward to 30 June as much as children look forward to going to the dentist…
But what does 30 June mean for you? How can you get the maximum out of your finances prior to 30 June? How can you reduce the amount of tax you pay (or increase your tax refund) when you see your tax accountant after 1 July?
Here are a few tips to get you started.
Make contributions to super
If you haven’t been making regular contributions to your super, June is a great time to make a lump sum contribution into super and get the financial benefits early in the new year.
If you are a low-income earner (under $38,564 per annum for the 2019/20 financial year) and meet certain criteria, you can make an after-tax contribution of $1,000 into your super account and the government will tip in an additional $500 into your super account – a guaranteed 50% return. All you need to do is your submit your tax return and the government will put the money into your super account!
If you are a higher income earner, you can make a before-tax contribution to super and use those funds as a deduction to your taxable income. For example, if you earn $100,000 per annum (and fall into the 39% marginal tax bracket) and put $10,000 into your super account, you will reduce your tax payable in your personal name by $3,900. Granted your super fund will deduct 15% tax on the $10,000 you put into your super account, but still, you are going to pay $2,400 less overall in tax. This tax benefit still applies if you are using your super to save for your first home. Just be mindful there is a bit of paperwork involved with this process, so make sure you get assistance from your accountant, financial planner or super fund.
Make a donation to your favourite charity or cause
If there is a cause you are passionate about and they have DGR status (deductible gift recipient) you can give this cause some funds and claim this money as a reduction of your taxable income. If you make a $1,000 donation to your favourite charity and take the receipt to your accountant, you can get a tax refund of $390 (based on an income of $100,000 per annum) or you have to pay $390 less in tax. Most charities would have DGR status – if not just ask.
I am a big believer in building wealth for the community around you. Furthermore, I believe most charities are more deserving of funds than the government is. If there is a way that I can donate to a cause I am passionate about and I can pay less tax in the process, I will take it and so should you!
End of financial year sales
Most big businesses want to maximise their sales prior to the end of the financial year. It makes them look good to their shareholders, which means the CEOs can up their gigantic salaries even further!
In order to get those last few dollars into their business before the end of the year, most businesses will offer you some substantial discounts to buy their product before the end of the year. Cars, TVs, electronics and whitegoods stores usually offer the biggest discounts and if these items are related to your work and/or home office, you will be able to claim a tax benefit by doing this. Friendly reminder when buying these items to use cash where possible – don’t get caught in a lengthy car loan or ZipPay which may mean you lose any applicable tax benefits in fees and interest.
Get an accountant on your team
We have seen a significant increase in people who are using MyTax to lodge their own tax return. But unless you are a low-income earner (i.e. you are a student, a stay at home parent or retiree) and are able to get all of the tax you have paid during the financial year back on your tax refund, you need an accountant on your team. People think they are saving $200 by not using an accountant but I believe the overwhelming majority of those doing their own tax return are donating extra money to the government. They are pinching pennies and missing millions, something that I talk about repeatedly on my blog.
There are so many things you can claim for which you may not be aware of (I’m not aware of most of them myself, my accountant always surprises me with something), there is no way an average Australian can be across all of the legitimate deductions that are available to you.
Most people are not aware that tax is going to be the biggest expense you pay over your lifetime. Unless you are someone who likes paying extra tax (I haven’t met this person yet), you must get advice from an accountant to maximise your tax return and reduce the overall amount of tax you pay.
Get a plan
I want you to take a moment and ask yourself two questions. One, how much are you financially worth 12 months ago and two how much are you worth today?
Sadly for most people they have not significantly increased their financial wealth over the next twelve months. They have worked 40 hours per week for 48 weeks of the year (1920 hours over the year for those who haven’t got a calculator next to them) and have nothing to financially show for it. What a shame!
Building your wealth does not happen by accident.
You don’t accidentally buy your first home.
You don’t accidentally understand your super.
You don’t accidentally pay down debt.
You don’t accidentally protect your loved ones.
You don’t accidentally retire early.
You need a plan in place to ensure the next twelve months don’t pass you by like the previous twelve months do.
Let’s talk about getting that plan in place – it will enable you to enjoy 30 June just as much as I do!
If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30-minute strategy session.
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Disclaimer: This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.
Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523