End of financial year planning starts now

Financial Planning

First we had the calendar new year, followed by the Chinese new year. A third new year is fast approaching and it’s important to plan for it.


1 July 2014 marks the start of a new financial year. But it’s important not to leave wealth accumulation and wealth protection until the last minute. There are many things you can do in the lead up to the end of this financial year to prepare for the new one.

This year it’s particularly important to pay attention to superannuation contribution limits. If you are eligible to contribute to super, consider if you have maximised your level of contributions to the maximum you can afford to do, within the limits allowed, and taking into consideration your income and lifestyle needs.

An annual limit of $25,000 applies to concessional contributions (which generally covers superannuation guarantee contributions from an employer, salary sacrificed contributions or personal deductible contributions). You can contribute more than this amount, but if you do you can expect to pay additional tax above the standard 15% applicable within the superannuation environment.

If you were aged 59 or older on 30 June 2013, you have a higher concessional contribution limit of $35,000 for this financial year. If you are in this category, you may need to adjust any salary sacrifice arrangements to take advantage of this higher threshold. An extra $10,000 in salary contributions equates to $8,500 of investable money in the tax-effective super environment. If this money was taken as normal salary, instead of in super contributions, you could end up with as little as $5,350 after tax.

If you have turned 49 or older this year, from 1 July 2014 you can also access this higher $35,000 limit. If you’re younger, there may be good news on the horizon. The existing $25,000 threshold is subject to indexation and current indications are that the standard concessional contributions cap will index to $30,000 from 1 July 2014. The ATO will confirm the actual cap closer to 1 July 2014, but it’s important to start thinking now about your options. For instance, could you afford to salary sacrifice more into super? Could you increase the level of insurance coverage you hold through your super?

Don’t forget to review your contributions this year to ensure you don’t accidentally exceed the cap. For example, have you taken into account that compulsory super contributions from your employer increased this financial year from 9% of your salary to 9.25%? If you plan your contributions close to the cap, constant monitoring is important.

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