By Shane Pinkerton

With the end of the Financial Year around the corner, it is time to think about what can be done to enhance your taxation position for 2009/10. It’s also worthwhile considering longer term planning and protection strategies professionally and personally.

There are a number of ways to enhance your financial position including superannuation contributions, pre-paying investment loans, making spouse contributions to Super and making an after tax contribution to Super. But don’t leave it until the last minute.

Making Concessional Contributions into Superannuation

The advantage of investing in Superannuation is the way it is taxed. Where a company structure pays 30% company tax on profits made, a deductible contribution to Superannuation will only be subject to 15% contributions tax. Effectively if a company is in a position where there will be retained profits carried over into the new tax year, a deductible contribution to Superannuation can be made to reduce the overall taxation liability. Care needs to be taken with regards to each recipient of the Superannuation contributions, as there are limits to the levels of contributions that can be made and on who can receive them. The taxation saving of this strategy is up to $1,500 for every $10,000 contributed.

Pre-Paying Investment Loan Interest for 2010/11

Investment Loans allow the deductibility of interest where an income producing asset has been purchased with the loan proceeds. There is an allowance given where an investment loan can be structured to allow pre-payment of interest for the following financial year. This can be of great assistance for an individual, especially where there has been an event such as a Capital Gain or increase in taxable income through the current year (such as a bonus payment or lump sum employer payment). The effect of making the pre-payment can give a boost to deductions in the current financial year, as long as the pre-payment is completed prior to 30 June. An example would be pre-paying an investment loan of $100,000 with an interest rate of 7% per annum by 30 June. This would create a $7,000 deduction for the individual.

Making a Spouse Contribution to Superannuation

Making a Superannuation Contribution to a low-income earning spouse from after tax funds entitles the contributor to a tax rebate. If your spouse has assessable income of less than $10,800 for the financial year you can make a non-deductible contribution to Superannuation of $3,000. This will entitle you to a tax rebate of $540. That is a Government guaranteed return of 18% on your investment.

Making an After Tax Contribution to Superannuation to gain entitlement to the
Government’s Co-Contribution

The Government’s co-contribution scheme continues to operate, and can be an effective method to build your Superannuation balance over time. There is a benefit for eligible employees earning under $61,920 of assessable income plus reportable fringe benefits, with the full co-contribution paid is your income is less than $31,920. The current scheme matches your non-deductible contribution dollar for dollar using a reducing scale based on income. At the maximum level up to $1,000 is available which is a 100% Government Guaranteed return on your investment.

All of these options require an understanding of your taxation position as the tax year comes to an end. It is important to plan these strategies in advance, to ensure they fit your position and so you can obtain maximum benefit by implementing each appropriate action with adequate time for administration and processing before the 30 June deadline.

Now is the time to get in touch with Fiducian and Taggart Partners to ensure you are aware of what you can be doing to make the most of your wealth.

Shane Pinkerton is an Authorised Representative of Fiducian Financial Services Pty Ltd and is located at Bunker Road Adamstown. For information 4965 3966.