The ASIC personal finance website MoneySmart today launched the Top 5 End of Financial Year Tips.
The tips tell Australians now is the time to get organised, set some goals, consider a first home savings account or sort your super and be wary of ‘tax effective’ schemes.
Delia Rickard, Senior Executive Leader Financial Literacy said ‘The end of financial year is not only a time to set up solid financial practices; it is the perfect time to get your super right. Especially since some superannuation benefits will be less generous after 30 June.’
‘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,' she said.
Research shows that most employed Australians understand the basics about super, but are less aware of its tax treatment. 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.
Here are MoneySmart’s Top 5 Tips for 2011/2012 end of financial year:
1. Become a master record keeper!
Start sorting out your tax receipts now. If you keep them in one place you'll find them easily at tax time and won't miss out on any tax deductions. See the ATO's claiming deductions webpage to find out what expenses you can claim to reduce your taxable income.
2. Create financial goals
If you didn’t get around to setting financial goals in January, now is the perfect opportunity. MoneySmart’s saving 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.
3. Sort your super
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). Be sure to get in before June 30 as the co-contribution matching rate is proposed to decrease to 50c for each dollar next year. See MoneySmart for information on super co-contribution.
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.
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. There is a limit on how much you can put into super each year by salary sacrifice.
For instance, if you're under 50 you can contribute up to $25,000 (including your employer's 9% contribution). If you're 50 or over you can contribute up to $50,000 this financial year (including your employer's 9% contributions). As of 30 June 2012, this concessional cap will be reduced to $25,000 for all people regardless of age. See MoneySmart tips on salary sacrificing.
4. Open a first home saver account
If you’re thinking of buying your first home and starting a first home saver account, now is the time. For every $1,000 you put in each financial year, the government will give you $170 (up to $935 each year). For more details see MoneySmart's first home saver account webpage.
5. Be wary of ‘tax effective’ investments
At this time of year we often see promoters pushing ‘tax effective’ investments or schemes. These involve complex schemes or borrowing money to claim a tax deduction.
To avoid losing money in these kinds of arrangements, find out as much information as possible. Make sure you understand the arrangement and that the promised tax benefits are actually available. You can do this by seeking independent advice, making sure the provider is licensed, checking for a prospectus or PDS, checking the ATO’s taxpayer alerts and looking for a specific ATO ruling that the scheme is entitled to tax concessions.
Only put money into something that is a sound investment in its own right, the tax benefits should be viewed as a bonus.
www.moneysmart.gov.au is ASIC’s personal finance website, providing Australians with independent information, tools and tips so they can make better informed financial decisions.
Notes:
1. 15 March 2011, ASIC ‘Financial Literacy and Behaviour Change’ sourced from http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep230-financial-literacy-and-behavioural-change.pdf/$file/rep230-financial-literacy-and-behavioural-change.pdf
2. 2011,Metlife Study of International Employee Benefits Trends http://www.metlife.com/assets/institutional/services/insights-and-tools/ebts/intl-ebts/intl-ebts.pdf. 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.
This release was updated on Thursday 10 May 2012.