The level of bonds in an investment portfolio will be determined by your asset allocation strategy combined with risk preferences and income needs
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Get an early start on your EOFY preparations to ensure you capture all returns available to you
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.
It’s important to capitalise any profits or losses within your portfolio before June 30 if you want to offset any gains against losses. Any losses utilised only provide a potential immediate tax benefit if you have realised capital gains in the current financial year.
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.
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.
There may be tax advantages to pre-paying interest on gearing strategies like margin lending and protected equity loans, as the interest may be claimable as a deduction against taxable income.
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 injections, as well as offering protection to any downside movements in the selected securities.
Click the link to learn more about investment lending or talk to an investment specialist.
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.
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.
View and download your statements now to access income earned and interest paid year to date. Update the totals at the EOFY.
Super remains the most tax-effective investment vehicle. From July 1, 2025, the percentage of an employee’s wage that an employer is required to pay their super account will increase from 11.5% to 12.0%. Refer to the Australian Taxation Office (ATO) website for full details.
Here is a check list of potential Super boosts:
Individuals 55 years and older can contribute $300,000 and couples $600,000 towards their super from the downsizing 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. However, selling a home and purchasing another can be expensive. Consider the costs vs the benefits before making a decison.
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. Following its recent election win, the labor government is pushing ahead with implementing this program but it has not yet started.
In preparation, consider ensuring your investment vehicle for income distributions allows for different tax rates and any change in asset allocations because of 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.
The changes are not yet law. However, you can start planning now.
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.
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.
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.
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.
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.
You can view more information on PAFs in this article
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 current as at the date of publication and is intended to be of a general nature only. It is not intended to be relied on as advice. It has been prepared without taking into account any person’s objectives, financial situation, or needs. Before acting on the information in this article, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, taxation or other professional advice before acting on any information in this article. This tax insight is general commentary only and is not investment research or a research report.
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© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.