A fresh new year is a great point in time to start planning out and monitoring your financial and tax affairs for the year ahead. Even though individuals can get their money and investments on track any given day of the year, psychologically, it can seem easier linking it to the new year milestone.
Here are three affairs to consider reviewing:
Review how your concessional (pre-tax) contributions are tracking against your contributions cap ($30,000 if you are younger than 50, $35,000 if you are 50 and over). Adjust future contributions, if necessary, to ensure you will maximise the tax concessions available through super for the year.
To reach your contributions cap, work out how much you need to salary sacrifice before June 30. Don’t forget to take into account contributions received for the year to date, as well as your employer’s expected compulsory 9.5 per cent contributions.
For those planning to start a pension with their super and wish to make a personal deductible contribution beforehand, ensure that you provide a notice of intent to the trustee. A notice of intent allows you to claim the tax deduction and have it acknowledged before commencing the pension. Otherwise, the deduction is lost forever. Individuals must also do this before making a withdrawal or rolling over benefits to another super fund.
The new year may be an appropriate time to consider rebalancing your portfolio. Offloading stocks with little chance of recovery and focusing on those with potential upside may be a good move for some.
Be mindful of ‘wash sales’ that result in a tax benefit e.g. selling an asset to lock in a capital loss to reduce or offset a capital gain and then buying back the same asset. The ATO keeps an eye on these types of transactions, and may cancel the tax benefit.
Trustees need to regularly review their investment strategy to ensure that it continues to reflect the purpose and circumstances of their fund. Reviews should take place at least annually and when circumstances change significantly e.g. when a pension commences, a new member joins or a member dies.
Keep in mind that it is not necessary to change your investment strategy; you are simply required to review it to ensure it is still appropriate.
Check that the value of any in-house assets you own is less than 5 per cent of the fund’s total value. If asset values fall to the extent that in-house assets exceed 5 per cent, it may be a good idea to make additional contributions to remain within this limit by June 30.