end of financial year tips

This is a guest post by The MoneySmart Team of the MoneySmart website. MoneySmart is an Australian website, run by the Australian Investment and Securities Commission (ASIC) to help people with their personal finances.

saving dollarsMany people think of the end of financial year as being all about tax and a flurry of receipts. In fact, it is the perfect time to reassess your finances and start planning for a stellar year.

If you didn’t get around to setting financial goals in January, now is the perfect opportunity. MoneySmart’s savings goals calculator helps you work out what it will take to reach your savings goals, how long it will take you and the steps you need to put your plan into action.

It is also a good time to consider the benefits you can get before the 30th of June. For example, if you’re thinking of buying your first home, consider opening a first home saver account. For every $1,000 you put in each financial year, the government will give you $170 (up to $935 each year). For more details see MoneySmart’s first home saver account webpage.

Superannuation is another area to look at, especially since some superannuation benefits will be less generous after the 30th of June. Research shows Australians understand the basics about super, but we are generally less aware of its tax treatment. Interestingly, women are less likely to say super is taxed at a lower rate than other investments (53% of women compared to 63% of men)[1]

The MoneySmart website has a super contributions optimiser tool to help you work out the best way to make super contributions. Here are some super options explained.

Sacrifice your salary

Many Australians are not taking advantage of salary sacrificing to top up their super. Only 25% of Australian employees contribute more than the standard 9% and only 20% use salary sacrifice.[2]

By ‘sacrificing’ some of your pre-tax salary and putting it into your super, it will only be taxed at the concessional rate of 15%. This may be lower than the tax rate for your regular salary.

As of 30 June 2012 the concessional cap will be reduced from $50,000 to $25,000 for people over the age of 50. If you’re under 50 you can contribute up to $25,000 (including your employer’s 9% contribution). Make sure you do not exceed the cap. See MoneySmart tips on salary sacrificing.

Get the government to contribute to your super

If you earn less than $61,920 per year (before tax), you can take advantage of the Government’s co-contribution if you make an after-tax contribution to your super. The government will match your contributions, dollar for dollar, up to $1,000 (depending on your income). Get in before June 30 as the co-contribution matching rate is proposed to decrease to 50c for each dollar next year.

Contribute to your partner’s super

If you contribute to your spouse’s super because they’re not working or on a low income, you may be entitled to a tax offset of up to $540. Read the ATO’s rules on receiving the superannuation spouse contribution tax offset.

Being ‘MoneySmart’ this end of financial year means thinking beyond receipts to reassessing your finances and planning for your future. This applies no matter your age or life stage.

MoneySmart is ASIC’s personal finance website, providing Australians with independent information, tools and tips so they can make better informed financial decisions.

[1] 15 March 2011, ASIC ‘Financial Literacy and Behaviour Change’

[2] 2011,Metlife Study of International Employee Benefits Trends. The Australian data for this international study was obtained through face-to-face, telephone and online interviews with 258 employers and 501 employees. The targeted sample was representative of the full-time employee population in Australia.

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