The end of financial year is always a time when tweaks and optimisations can be made to improve your wealth position. But this year even more so, there are a number of opportunities available to give your wealth a boost as we lead into the EOFY. So if you have been thinking about getting advice, now is a great time. Here’s why.

Financial advice fees are now (partially) tax deductible

The ATO has changed their guidance on the tax deductibility of financial advice fees.

Broadly this is expected to make it easier for clients to claim a portion of their financial advice fees as a tax deduction. Whilst the actual portion claimable depends on the client and the type of advice you receive, some examples of things that are likely tax deductions are:

• Advice relating to investments in personal names
• Advice around income protection insurance

Practically speaking, this means that for advice fees paid before the end of financial year, some of these may be able to serve as a tax deduction in your upcoming tax return. Many advice firms, like ourselves, charge a fixed annual fee, so you can get the tax saving soon for the full advice year ahead.

Maximising deductions + maximising your super balance

This side of the end of financial year is also the time to look at what else you can do to reduce tax via additional tax deductions.

One strategy that is often popular for our clients is making additional contributions to superannuation. Of course, the obvious benefit of this is the impact on your retirement savings – even small contributions now can have a large impact later due to the power of compounding. For example, assuming an 8% pa return, $1,000 contributed to super today by a 40 year old is expected to be valued at $5,390 at age 60, or $7,560 at age 65 (or another 5 years on and the amount jumps to $10,610!).

But there’s more to it.

The other relevant benefit at tax time is that these additional super contributions can lead to tax savings. For most people, super contributions (within allowable limits) are taxed at a lower rate than your regular income tax rate.

If we take the above example, if you are on the highest tax rate of 47%, you would have only received $530 in your pocket for $1,000 of salary, or at a tax rate of 39%, cash in your pocket would be $610. However, if you contribute that $1,000 to super instead, as long as you are below your contribution cap, then this amount is taxed at only 15%, meaning you actually get $850 (invested in super). For someone on the 47% tax rate, this equates to a tax saving of $320 on every $1,000.

The difference, of course, is that this money is invested in super, and therefore not accessible until retirement (from age 60). So whilst there is a tax saving, it is only appropriate to make additional contributions if your cashflow position allows you to do so. If you do have available surplus cash flow, and haven’t reached your concessional contribution cap, then directing some money into superannuation can be a great strategy all-round.

Resetting your cash flow plan for the year ahead

From 1 July 2024, there are also several changes coming, including:

• Superannuation contribution caps are increasing
• Income tax rates are dropping

The concessional contribution cap (which includes employer and salary sacrifice contributions) will increase to $30,000 (from the current $27,500). These are the contributions that are referenced earlier, which are taxed at 15%.

The non-concessional contribution cap is also increasing in the new financial year, lifting from $110,000 to $120,000. The non-concessional contribution cap is the maximum amount of after-tax contributions you can contribute to your superannuation in a year without those contributions being subject to extra tax.

Income tax rates are also decreasing. For those on the 19% rate, this will drop to 16%, and for those on 32.5%, this will drop to 30%. At the same time, the threshold above which the 37% tax rate applies is increasing from the $120,000 to $135,000, and the threshold above which the 45% rate applies is changing from $180,000 to $190,000.

Having a plan to maximise the upside of these opportunities is important, and it is always wise to reset/refresh your plans to take into account any available upsides.

As we approach the end of financial year, it is important to review and reset your financial position to ensure you are maximising the opportunities available for you. If you have any questions about how we can help, or would like to discuss your situation with one of our Advisers, please don’t hesitate to reach out.

Any information in this article is general in nature and does not consider any of your personal objectives, financial situation and needs. It is as intended, to be of a general nature only and NOT a recommendation to you. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a registered financial adviser.