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End of year planning tips
- By Dirk Dobbs
- Published 12/04/2010
- Autumn/Winter 2010
- Unrated
5. Review pensions
The end of the financial year is always a good time to review your income stream.
The 50% reduction in the minimum pension payment was extended to 2009/10 due to falling asset values as an outcome of the GFC. If you have already drawn your minimum pension, you can elect to receive no additional payments for the remainder of the financial year. This will help to preserve the capital
in your fund.
If you are over 55 and still working, you could consider a transition to retirement (TTR) strategy. There are tax incentives associated with moving benefits from accumulation phase to the tax-free pension phase, plus the ability to combine salary sacrifice with a TTR makes this strategy particularly attractive. In addition, you have the flexibility to reduce the hours you work and supplement your income by drawing a pension.
You may benefit from these strategies if you:
6. Gearing in super
Given relatively low interest rates and falls in many asset values, you may consider borrowing within super to invest. However, there are restrictions that apply to this strategy that must be adhered to.
You must be comfortable with the concepts and risks associated with gearing (see separate article). This strategy may be beneficial if you would like to boost your super, but are restricted by the contribution caps. However, you must be confident that your fund can eventually pay back the loan. Given the risks involved with gearing and the rules and regulations that apply, we recommend that you seek advice before considering any gearing strategy.
7. Prepaying interest
You may benefit from this strategy if you have borrowed money for an investment, or you are contemplating doing so before 30 June 2010. This strategy is especially tax-effective if your assessable income puts you in the top marginal tax bracket.
As long as the borrowing is used for investments that will generate assessable income, you are entitled to claim a tax deduction for the interest payable on your loan. By pre-paying the interest for 2010/11 on your investment loan now, you may be able to claim a deduction for that interest in your 2009/10 tax return.
Next steps
The end of the 2009/10 year will be here before you know it. Don’t wait until 30 June to get the ball rolling. In the immortal words of Thomas Jefferson, “Never put off till tomorrow what you can do today.” So get started now and make an appointment with us to discuss your end-of-year strategies.
The end of the financial year is always a good time to review your income stream.
The 50% reduction in the minimum pension payment was extended to 2009/10 due to falling asset values as an outcome of the GFC. If you have already drawn your minimum pension, you can elect to receive no additional payments for the remainder of the financial year. This will help to preserve the capital
in your fund.
If you are over 55 and still working, you could consider a transition to retirement (TTR) strategy. There are tax incentives associated with moving benefits from accumulation phase to the tax-free pension phase, plus the ability to combine salary sacrifice with a TTR makes this strategy particularly attractive. In addition, you have the flexibility to reduce the hours you work and supplement your income by drawing a pension.
You may benefit from these strategies if you:
- are 55 or older and have retired
- are 55 and still working
- have already started to draw a pension.
6. Gearing in super
Given relatively low interest rates and falls in many asset values, you may consider borrowing within super to invest. However, there are restrictions that apply to this strategy that must be adhered to.
You must be comfortable with the concepts and risks associated with gearing (see separate article). This strategy may be beneficial if you would like to boost your super, but are restricted by the contribution caps. However, you must be confident that your fund can eventually pay back the loan. Given the risks involved with gearing and the rules and regulations that apply, we recommend that you seek advice before considering any gearing strategy.
7. Prepaying interest
You may benefit from this strategy if you have borrowed money for an investment, or you are contemplating doing so before 30 June 2010. This strategy is especially tax-effective if your assessable income puts you in the top marginal tax bracket.
As long as the borrowing is used for investments that will generate assessable income, you are entitled to claim a tax deduction for the interest payable on your loan. By pre-paying the interest for 2010/11 on your investment loan now, you may be able to claim a deduction for that interest in your 2009/10 tax return.
Next steps
The end of the 2009/10 year will be here before you know it. Don’t wait until 30 June to get the ball rolling. In the immortal words of Thomas Jefferson, “Never put off till tomorrow what you can do today.” So get started now and make an appointment with us to discuss your end-of-year strategies.
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Article Series
This article is part 4 of a 4 part series. Other articles in this series are shown below:
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End of year planning tips