NEWS + VIEWS – 31/5/2024
MARKETS
Share markets reacted quickly to buoyant consumer confidence levels in the US and higher than expected inflation readings locally. Local forecasts of interest rate cuts have been pushed out, some predicting to as late as the end of 2025.
Concerns are heightened by the inflation impact of tax cuts from July and the wave of government spending. Productivity draining industrial relations policies will probably also affect inflation.
At the same time business conditions locally are weakening and the number of smaller companies closing has risen significantly. Consistent with that weakness is declining forward orders (see charts below from NAB and Macquarie.
Macquarie claims that weakness in forward orders is a good indicator of near-term profit downgrades. May and June are typically weaker months for share markets, so moves down would not be surprising.
END OF FINANCIAL YEAR TASKS
The end of the financial year is fast approaching so we list below our annual reminder of things you may need to attend to before the 30th of June.
SUPERANNUATION
Minimum Pension
If your super is in pension phase, you need to withdraw your minimum pension by 30 June. Your accountant can advise of your minimum pension for those with a Self-Managed Super Fund (SMSF).
Concessional contributions
The maximum amount for concessional contributions for 2023/24 is $27,500. You receive a tax deduction for these contributions although they are taxed at 15% in your Super Fund. Consequently, they may be attractive for those earning over $45,000 p.a.
You need to meet the work test (40 hours in a 30-day period) between 67 and 74 years of age to make personal contributions (i.e. not mandatory employer or salary sacrifice contributions).
As the concessional contribution limit rises to $30,000 in 2024/25, you should revisit salary sacrificing and personal contributions for the next financial year to take full advantage of the benefits.
Carry forward unused concessional contributions
Those with a super balance of less than $500,000 may be able to use carry forward unused concessional contributions from the previous five years. This may be worthwhile if you have sufficient taxable income to utilise the tax deduction.
Non-concessional contributions
Those under 75 years of age with a total super balance of less than $1.9 million in 2023/24 can make non-concessional contributions to super of $110,000 p.a. and that limit will rise to $120,000 next financial year. Unlike concessional contributions, you do not receive a tax deduction for these contributions.
Bring forward rule
You can utilise the bring forward provision up to the age of 75, which allows up to two years of caps to a total of $330,000 in one year ($360,000 from 1 July 2024). You will be unable to make further contributions during the following two financial years. Note that to maximise contributions, you may consider a $110,000 contribution before 30 June 2024 and then $360,000 in the next financial year.
If your total superannuation balance is more than $1.68 million, you may not be able to take advantage of the full $330,000 bring forward rule as it would take your super balance above the maximum $1.9 million transfer balance cap.
With the changing caps, contributions are becoming more complex, so it is important to get advice before making contributions.
Government super co-contribution
If your income is less than $60,400 in the 2023/24 financial year and at least 10% of your total income is from employment (not investment) activities, you may receive a government super co-contribution of up to $500. The co-contribution is 50% of personal non-concessional contributions although it scales down by $0.033 per dollar of income above $43,455.
Spouse contribution tax offset
Making an after tax (non-concessional) contribution to super to your spouse earning less than $40,000 may attract a tax offset to your taxable income. Like last year, the full $540 offset is available where total spouse annual income is less than $37,000 and phases out at $40,000.
Downsizer contributions
If over 55 years of age, you may contribute up to $300,000 from the proceeds of the sale of your home to super. Each spouse can contribute and the contributions don’t impact other caps.
You must have lived in the home for more than ten years and thus be exempt or partially exempt from capital gains tax. The contribution must be made within 90 days of receiving the sale proceeds and the appropriate form lodged by that time.
The above is probably a future consideration if not planned for already this financial year.
PERSONAL
Prepay investment related interest
If you have investment loans, it may be worthwhile considering paying the interest in this financial year.
Home office expenses
Gather receipts for expenses relating to your home office and travel. Consider bringing forward near term purchases.
Donations
Locate receipts for donations made over the course of the year. Possibly ‘bring forward’ proposed donations.
Review who owns assets
It is often tax advantageous to hold assets in a lower income earning spouse’s name. This may assist in optimising your tax situation in future years.
Realise capital gains/losses
Consider deferring the sale of assets to crystallise a capital gain in the next year (and defer tax on the gain). If gains have been made, then consider selling assets that would create a capital loss. This may also relate to a SMSF where monies are in accumulation phase.
Keep in mind the risk of receiving a lower sale price by deferring or bringing forward the sale of assets.
Also note that the capital gain/loss is generally crystallised when a sale contract is entered into, not when sale proceeds are received.
Discretionary Trusts
Given the Tax Office’s focus on trusts, one of the key end-of-year tasks is the annual trust distribution minutes.
The trustees of a discretionary trust must complete these minutes before 30 June each year. A failure to do so may mean income is taxed at the highest tax rate.
Gerard O’Shaughnessy
P 0423 771 330
Important Disclaimer
The directors, employees and authorized representatives of PPN Wealth do not guarantee the information in this report to be complete, up to date, accurate nor applicable to your personal circumstances. This is general investment advice only. You should not act on recommendations in this report without discussing proposed actions with your PPN Wealth adviser to ensure recommendations are suitable to your circumstances.
The principals, associates and employees of PPN Wealth may have investments in the securities or companies, referred to in this report.
This report may not be distributed in any way without the prior permission PPN Wealth. The directors, employees and authorized representatives of PPN Wealth do not accept any liability for third parties’ actions relating to this report.
