5 ways to round up the financial year and keep growing your wealth – tips from a financial planner

As the end of financial year draws closer, there may be a time limit for some tasks you need to get done, but not for the overall planning of your wealth creation.

Property is a long-term investment strategy, one that is easily relatable and liked by Australians, but what else can you do to be more strategic with your money?

Our guest writer Antoinette Mullins, financial planner at Steps Financial, highlights that like a house, your wealth creation strategy needs to have strong pillars. She shares 5 ways to round up the financial year and keep growing into the next one.

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Growing your wealth, is like building a house:  focus on the foundations, then build from the ground up through strong weight-bearing pillars – this will bear the weight of the walls and roof.  Having strong pillars of wealth creation means directing your resources to various assets, and not just focusing on one strategy.

  1. Superannuation is one of those strategies, with the looming end of financial year opening up some opportunities you should be aware of:

Making tax-deductible contributions can be a tax-effective way to build your superannuation. The concessional cap for the 2021 financial year is $25,000 and includes employer and salary sacrifice contributions, as well as any personal contributions you can claim as a tax deduction.

Consider a “catch up” concessional contribution:  This might be useful if you pay income tax at more than 32.5% and are wanting to build your super, so use this strategy to reduce your taxable income if your income is higher than usual in 2021 (if you’ve received a bonus or sold an asset).  If you haven’t used up the $25,000 a year concessional contribution limit over the past 3 financial years (2019, 2020 & 2021), you can actually make a lump sum contribution before the end of the financial and claim a tax deduction for the full amount.  Your total super balance needs to be below $500,000 (as at 30th June 2020), but remember – this strategy might not be right for you, so seek advice before making the contribution.

For more information on spouse and government contributions, please speak with your financial planner or get in touch with our team for an introduction. 

  1. For those with a Self-Managed Super Fund (SMSF) here’s a few points to remember, with end of June deadline looming:

Review and Update the Investment Strategy not forgetting to include Insurance of Members – review your investment strategy in the Trust Deed and ensure all investments have been made in accordance with it.  If your fund’s current investments are outside of the asset ranges highlighted in the strategy, it is important you acknowledge this in writing and document your intended action to address this (or update your strategy).  Also, make sure your investment strategy has been updated to include consideration of insurances for members. 

Get market values for your SMSF assets as at 30th June.  Many of the strategies, rules and concessions are linked to an individual’s Total Super Balance (TSB) so obtaining up-to-date valuations may open up opportunities that some members felt were closed to them.  If the members are in retirement phase and drawing a pension, the minimum pension drawdown rates are linked to the year-end balances and if the fund values are not up to date, you are at risk of breaching the pension rules (which may impact the fund’s tax-free earnings proportions).

Here are some tips for those with investment pillars, so we don’t neglect one side of your “house”:

  1. Consider prepaying interest on investment loansyou can’t prepay interest on variable rate loans, so in this current low-interest environment, you may want to review your loans and consider fixing and prepaying the interest for the year ahead.  You will get the full tax deduction in the current financial year, which could help reduce tax in a high-income year.
  2. Review Capital Gains Tax Position of each investment clever planning will help you reduce the tax payable. Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made.
  3. I’ve saved the “foundation” for last – wealth protection really is the foundation on which your house should be built Review your overall insurance portfolio to ensure it provides adequate cover.  Income Protection premiums are tax deductible at your marginal tax rate, so consider prepaying the premiums for the year ahead to get the full tax deduction in this financial year.  Super-linked insurances can be paid by yourself, so the contribute is treated like a super contribution.  Depending on your circumstances, you could treat this contribution like a Personal Contribution or a Concessional Contribution (see above Super contribution tips, for how each of these could benefit you).

These tips are better if you plan and implement them before the end of the financial year.  However, make sure you leave enough time to seek advice as they might not be appropriate for your personal circumstances and investment goals. Don’t rush the build of your wealth creation into what you can’t fit in now, think about what you can also tackle in the new financial year so you don’t run out of time again.

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Bio: As a qualified youth worker and trauma counsellor, Antoinette brings a different skillset to her role as financial adviser. This has enabled her to provide emotional support to clients going through a difficult time, as well as financial advice to improve their situation. She has a passion for improving the financial literacy of her clients so that they not only understand their financial plan, but also get actively involved in implementing it.

As a Certified Financial Planner® with 15 years’ experience, she enjoys working with a range of clients from those with complex structures to pre-retirees wanting a clear retirement plan.

Specialising in providing advice to professional women, Antoinette is a seasoned presenter at seminars and boardroom lunches and her mainstream media appearances include Sky News Business and Channel 9’s The Today Show.

She enjoys writing articles aimed at spreading awareness of, and confidence in, managing your own money and contributes regularly to various publications including The Financial Standard, Money and Life Magazine and The New Daily.

Antoinette’s Website    |     LinkedIn    |    Facebook

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Disclaimer: Active Property Investing and its representatives are not qualified Financial Planners, Financial Advisors or Taxation Accountants. The information presented is general advice only and should not be construed as personal, financial or credit advice nor should it be considered as specific recommendations or investment advice.

This information has not taken into account your needs, objectives and financial situation. As each individual’s circumstances are different, we strongly recommend your own independent review, investigation and analysis of any proposed investment.

We recommend that before making an investment decision each prospective investor should consult independent and professional advisers and should consider whether an investment is appropriate in light of your particular legal requirements, investment objectives, financial circumstances and needs.

While all attempts have been made to verify the information provided, neither the author, presenter nor will publisher bear any responsibility or liability for any error, omission or contrary interpretation of the subject matter.