Three steps to a successful start to the new financial year
By Janine Varughese, StatePlus Financial Planner
There’s never a better time to get your finances in order and make plans for your future than at the beginning of a new financial year. Here are three ideas for getting off to a fresh and positive start.
1. Get on top of your tax
There will always be something more urgent or important than preparing your tax return. But knowing your financial position can help you make important decisions about spending and saving in the year ahead.
To reduce your tax and get the most from your money, make sure you claim all the deductions you are entitled to. It’s a good idea to check out the ATO’s website for a full list of deductions. Whilst you are probably familiar with common claims, you might be surprised to learn you may be able to claim things such as home office expenses, income protection insurance premiums and work conferences.
And here’s a tip for the year ahead – if you have trouble keeping track of your receipts, you may like to download the ATO app. With a direct link to myTax, it makes it quick and easy to submit photographs of your receipts and lodge car trips.
When you submit your return, you might find out that you are entitled to a tax rebate. While it’s tempting to put your windfall towards a holiday or shopping spree, it could be worthwhile giving some thought to your savings and super balance.
If you’re thinking of using your rebate to top up your super, it’s a good idea to talk to your planner on whether this is the best strategy for you. And you’ll need to bear in mind the possibility of the proposed lifetime non-concessional contributions cap announced in the 2016 Federal Budget, placing a $500,000 lifetime limit on after-tax super contributions.
2. Think about salary sacrifice for your super
Doing your tax return might get you thinking about being more tax efficient. Making extra contributions to your super through salary sacrifice can be a great way to pay less tax and save more for retirement.
In simple terms, a salary sacrifice contribution is a pre-tax payment that goes straight from your salary to your super account. Depending on your marginal tax rate, it could reduce your overall tax burden for the year because your contribution will be taxed at just 15%. Plus, you’ll be boosting the retirement savings that you’ll get to enjoy when you’re no longer working.
For example, let’s say you earn $90,000 per year before tax, excluding your employer's super contribution. If you redirect $10,000 of your pay into salary sacrifice super contributions, you will save $2,400 in tax, with the extra money going into your super fund.1
|Does nothing||Salary sacrifices $10,000|
|Extra money into super||$0||$8,500|
|Net benefit||$66,953||$69,353 ($2,400 better off)|
Not everyone can access salary sacrifice so you’ll need to check with your employer. And your financial planner can help you decide if salary sacrifice is right for you and check if any extra super payments will push you over the annual concessional contributions cap.
For more information on how you can benefit from salary sacrificing speak with your financial planner or visit our website https://www.stateplus.com.au/superannuation/understand-superannuation/salary-sacrifice
3. Set your goals and budget for the year
There’s no better way to improve your personal and financial wellbeing than setting clear goals for the next 12 months and a budget to help you achieve them. Perhaps you’re thinking about replacing your car or saving for home renovations. Or maybe it’s a good time to boost savings for a rainy day.
And instead of pouring over spreadsheets, why not take advantage of one of the many apps available on your smartphone to help you track your expenses on the go. As you get into the habit of tracking how you spend, you can tighten your belt and save without making big sacrifices to your lifestyle.
Here’s a few budgeting apps you might like to try:
- Pocketbook – The most widely used budget app in Australia, it connects with many of the major banks
- TrackMYSpend – A simple tool developed by ASIC to track your spending habits
- Goodbudget – A handy bucket system lets you organise and track your spending
1 All figures quoted in this example are sourced from www.moneysmart.gov.au. Assumptions: The figures used in this table are estimates only and are based on 2015/2016 income tax rates and a Medicare Levy of 2%