The importance of preparing for the end of financial year (EOFY) is a crucial stage as an SMSF investor, as many actions MUST be completed before 30 June!!
Here are 3 actions for end of year investment strategies to set-up well for the end of financial year. (3 more next week!)
1. Consider how your investments are structured
When purchasing an investment, it is important to get advice and consider how the investment is owned. Common structures include individual ownership and joint ownership, however structures such as Super, discretionary (family) Trusts and Companies are often miss-used or ignored.
Consider – the type of investment, the expected return, the expected size of the investment and also the end goal of the investment before deciding on a structure, as how an investment is owned can have a big impact on how it is taxed both now and into the future.
2. Capital Gains review
If you have made a capital gain, you may be able to reduce how much CGT you will have to pay (or more precisely, how much tax you have to pay for the entire year) by making concessional contributions. For example, if you have made a capital gain of $50,000 (reduced to $25,000 for assets held longer than a year for individuals), then a concessional contribution (CC) will generally reduce your taxable income and might allow you to pay less tax on your capital gain, particularly if it impacts on your marginal tax rate. But, in any case, a $10,000 CC could save your tax return of up $4700, while you’ll pay a maximum of 23.5% on the capital gain itself.
3. Capital gains tax relief in pension mode in SMSF
If you had more than $1.6m in pension or transition-to-retirement pension on 30/6/17, then you were able to potentially take advantage of the CGT relief provisions when selling down assets to meet the Cap., to soften the blow of the new transfer benefit cap (TBC), of $1.6m.
Those decisions need to be made soon, if they have not been made yet, before 30 June.
Note – The action required is rarely portfolio-wide, but should be made asset by asset. There will be assets in most portfolios where you want to apply for the CGT relief, while other assets (potentially, where you’re sitting on losses) where you don’t want the CGT relief, so that you can use a future CGT loss to offset other gains.
It is a complex decision-making process, which might go down to evaluating each parcel of a particular share that you bought over an extended period. Don’t leave this complex work until too close to the deadline – sit down with your adviser and/or accountant to work through this process, sooner rather than later.
Look for the 3 more EOFY actions coming next week! And more early June! – sign up to ensure you get them to your inbox!
What are your Thoughts? Comment below!