‘Tis the season to peer at finances

Bruce Brammall, The West Australian, 4 June, 2018

Happy New Year

It’s June and, as you’d expect, it’s a bit fresh outside. Which makes it the perfect time for our favourite indoor sports.

Not that indoor sport. Get your minds out of the gutter. I’m talking about “grand final” time for your personal finances.

And as most of your finances are handled via your laptop – with the odd trip for a purchase from Officeworks – there’s plenty you can do, while watching the footy, or, at this time of year, the NBA finals.

Sure, there’s the usual mad scramble for last-minute deductible expenses on purchases. But that’s every year.

There are two things to concentrate on this particular June. One is a first-time-ever opportunity. The second is what to do when you’ve had a good year in the market.

The really big opportunity this year is actually superannuation. And it’s an exciting one. Yep, it’s getting me all a bit jingly!

For the first time ever, almost anyone can plonk money into super and get a tax deduction for it. And it will look like you’ve been a good little super saver and salary sacrificed all year.

From 1 July last year, a rule was changed so that employees could contribute to super as easily as the self employed (who have always been able to make their contributions at any time).

It was a stupid archaic rule. But, essentially, it meant that if you were an employee, you could only contribute extra to super via salary sacrifice. If your employer didn’t offer salary sacrifice, tough luck.

However, now, you can get to this stage of the year and decide “I want to do some tax planning and help out my super” and make a contribution.

How does it work?

Simple. You make a contribution to your super fund with cash (usually via EFT). Then you claim a tax deduction. Plus fill out a small bit of paperwork.

What you need to keep in mind is that your contribution, added to your Superannuation Guarantee payments from your employer, must equal $25,000 or less.

So, if you’re earning $100,000 and your employer/s is/are paying 9.5 per cent, or $9500, you can’t contribute more than $15,500.

Say you put in $15,000. You get a tax deduction for that amount and you’ll receive (in this example) 39 per cent of that back as a tax return, or $5850. But that $15,000 will only be taxed at 15 per cent in your super fund, so your super fund will get $12,750 to invest.

Most Australians will now be able to do this each year. Make a late decision, if warranted, to put excess savings into super, without having to commit to a monthly amount during the year.

Have you made a big capital gain this year? Received a big bonus? Well, this new rule will allow you to help your super directly and allow you to manage your tax at the same time and potentially reduce the tax you pay on the extra income you’ve received.

If this isn’t clear to you … it’s important to get proper financial advice.

Speaking of which … with a month to go, and barring a bit of a disastrous June, gains in your share portfolio this year should be looking pretty healthy.

As of Friday, the Australian market was up about 5 per cent. Add another 4 per cent or so for dividends and it’s been a year that we shouldn’t be grumbling about too much.

If you’ve had some money invested internationally, those assets have, on average, done even better.

It’s been a reasonable year. To date.

If you’ve been tempted to take some gains and have done so, are you going to rebalance, take some profits, or cash out?

That call will depend on your personal circumstances.

But June is a great time to take that annual, really critical, look at your portfolio. If you’ve made gains, should you be selling some dogs in your portfolio that have fleas, to reduce the capital gains from sales of other assets?

If you’ve been watching international markets – particularly the US – and wondering why you’re not invested in them, should you take some time to consider how you’re going to get yourself that exposure (perhaps by exchange-traded funds, if direct trading is your thing)?

And what about the usual end-of-year purchases for tax deductions?

Little is going to beat a contribution to super, as per above, in my opinion. But many industries have tax-deductible expenses that can be claimed. And if you’re going to have to spend the money in a few months … why not spend it now and get the money back sooner?

Bruce Brammall is the author of Mortgages Made Easy and is both a financial advisor and mortgage broker. E: bruce@brucebrammallfinancial.com.au.

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