Set aside some time and get your EOFY tactics in place to ensure you maximise the tax effectiveness of your investment strategies without the stress of leaving it to the last minute. We have some tips to help.

1. Review your investment portfolio

It’s important to capitalise any profits or losses within your portfolio before June 30 if you want to offset any gains against losses. However, realised capital losses only provide a potential immediate tax benefit to the extent that you have realised capital gains in the current financial year.

• Which assets to sell?

If you have crystallised gains during the year, consider the sale of underperforming investments that no longer fit within your portfolio strategy and long term view of where future growth will be achieved.

• Top Tip

View and download your statements now; understand your position and talk to your advisors and investment specialists. Don’t leave it till the last minute at the end of June.

2. Boosting your investment firepower

There may be tax advantages to pre-paying interest on gearing strategies like margin lending and protected equity loans, as the interest may be claimed as a deduction against taxable income.

• Which gearing strategy to choose?

Each strategy has different benefits and risk factors. Margin lending allows you to borrow, to invest in a broad range of listed and unlisted securities, however, if your portfolio underperforms you may have to inject additional cash to maintain pre-set investment ratios. Protected Equity Loans (PELs) enable you to borrow up to 100 per cent of your investment into ASX-listed shares with no additional calls for cash injection and protection to any downside movements in the selected securities.

• Top Tip

Click the link to learn more about investment lending or talk to an investment specialist.

3. Investment property considerations

Inspect your properties and consider bringing forward repairs before the end of the financial year to maximise tax offsets. Similarly, you may consider prepaying expenses like property rates and insurance and interest on your loans.

• Getting into the detail

Do you have a quantity surveyor report so you can utilise Division 42 to claim depreciation and capital works deductions? If you are not sure how to work out your deductions, it’s best to seek professional advice.

• Top Tip

View and download your statements now to access income earned and interest paid year to date. Update the totals at the EOFY.

4. Superannuation – the basics

Super remains the most tax-effective investment vehicle. Here is a check list of potential Super boosts:

•  Maximise your concessional super contributions – You can consider claiming a personal tax deduction for concessional contributions up to the new limit of $27,500 (including both employer and personal concessional contributions
• Consider catching up – If you have less than $500,000 in super and haven’t fully used the concessional cap in previous years from 1 July 2018, you may be eligible for a ‘catch-up concessional contribution’.
• Make a non-concessional contribution – The annual limit for non-concessional contributions has been indexed from $100,000 to $110,000 for FY23/24 and $120,000 in FY24/25. You can also make a larger contribution up to $330,000 over three years under the ‘bring forward’ rule (up to age 67).
• Boost your spouse’s super – If your spouse is on a lower income than you, contributing to their super will provide a boost while minimising your tax liabilities.
• Changes to superannuation

Downsizer contribution – The push to free up larger homes for younger families continues. The eligible downsizer provisions were lowered from 60 years and over to 55 effective 1 January 2023. More individuals can now contribute $300,000 and couples $600,000 towards their super from the sale of a family home. However, the contribution cannot exceed the total proceeds from the sale of your home.

This is a one-time only concession. A benefit of making a downsizer contribution and investing your money in super is the potential tax savings. That is, when you draw down on your super as an account-based pension you do not pay tax on investment earnings, on amounts up to $1.6 million.

• Higher taxes for higher super

In February 2023 the Australian government announced plans to increase the tax rate on super accounts with a balance over $3 million from 15 per cent to 30 per cent. Starting 1 July 2025, the changes will apply to all accumulation and pension accounts, including self-managed and industry super funds. It will also not be indexed to inflation, so over time an increasing number of people will be impacted by the change. The tax changes, which has been referred to the Senate Economics Legislation Committee, will not be retrospective.

Ensure your investment vehicle for income distributions allows for different tax rates and any change in asset allocations because of the changes to super. For instance, you may review the level of capital gains from high growth assets within a portfolio that would be taxed at the higher 30 per cent rate, against low or deferred tax investments like international shares, cash, and bonds. Alternatively, there may be avenues to defer capital gains until a more opportune time like retirement.

• Top Tip

The changes are not yet law and will not be enacted until after the next Federal election. However, you can start planning now.

5. Distributing income to family members

If you use an investment vehicle like a trust or private company to distribute income to family members, you must do your income estimates and prepare an annual trust distribution minute before June 30 each year. For a trust, ensure you are aware of any amendments made to the trust deed and ensure any resolution to distribute income or capital is consistent with the deed.

• Is an investment vehicle right for you

Discretionary family trusts enable those managing significant assets to distribute the earnings of a trust to a number of family members, some of whom may be on a lower marginal rate. Private companies allow income to be taxed at the 30 per cent company tax rate, which may be lower than the marginal tax rate for individuals in a family group.

• Top Tip

Deciding which structure, if any, will suit your circumstances is best done with a financial expert, as there are costs associated and considerable bookkeeping involved.

6. Giving back

Charitable donations are tax deductible but in years where you may have realised a sizeable capital gain and be subject to a large tax bill, it may be beneficial to give more.

If you regularly adjust your investments and crystallise gains, it may be worth considering a private ancillary fund (PAF). Like a self-managed super fund, PAF’s allow you to actively manage your investments and think more strategically about the way in which you want to support charities. It also creates a dedicated vehicle where younger members of a family group can be introduced to wealth in a benign environment.

• There may be significant tax benefits

Funds placed in a PAF are eligible for an immediate tax deduction. If you offset contributions to income earned at the marginal tax rate of 47 per cent, then your donations are effectively costing you 53c in the dollar.

• Top Tip

You can view more information on PAFs in this article

Conclusion

Ensuring you are making the right deductions and have the right investment strategies, structures and reporting systems in place to maximise available tax benefits becomes more complex with increased wealth, particularly within an extended family group. Seek advice early so that you do not miss opportunities that need to be enacted before the close the financial year.

Important Information

The information contained in this article is gathered from multiple sources believed to be reliable as of the end of April 2024 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on the information in this article you should consider whether it is appropriate for you’re your objectives, financial situation or needs. You should seek independent legal, financial and taxation advice before acting on any information in this article. ©2024 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.

All information in this article is intended to be accessed by the following persons ‘Wholesale Clients’ as defined by the Corporations Act. This article should not be construed as a recommendation to acquire or dispose of any investments.