Key opportunities and planning for EOFY 2017|18

With 30 June fast approaching this is a reminder of the superannuation and tax planning strategies that you may wish to consider and implement before 30 June.

Government Co-Contributions

Eligible low-income earners ($36,813 or less) who make an after-tax contribution into their superannuation account of up to $1,000 may qualify for a government paid co-contribution of up to $500.  Please contact our office for eligibility.

Spouse Contribution

Where a member of a couple earns less than $37,000, their partner can make an after-tax superannuation contribution of $3,000 on their behalf and receive a tax offset of up to $540. Please contact our office for eligibility.

Maximising your concessional superannuation contributions and claim a tax deduction.

Effective 1 July 2017, the 10% maximum earnings condition was removed for the 2017-18 and future financial years. This means that most people under 75 years old can claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).

The concessional cap is currently $25,000 for all individuals, please keep in mind this includes your SGC/employer contributions; you can therefore make up the difference and claim a tax deduction on the balance up to the cap.

Non- Concessional superannuation contributions

The non-concessional contributions cap is $100,000 p.a. or a bring forward $300,00, over a three-year period.

If your total superannuation balance is equal to or greater than $1.6million you will no longer be eligible to make non-concessional contributions.

Pre-payment of deductible expenses

Pre-payment of up to 12 months of premiums on an income protection policy held outside super or interest expense on an investment loan can bring forward that deduction into this financial year. For individuals making pre-payment for the first year they may have the added bonus of being able to claim up to two years’ worth of deductions in the one tax year.

Small Business – “Base Rate Company” Eligibility

From the 2017-18 income year, a Base Rate Entity is eligible for the lower 27.5% company tax rate.

However, you still need to be a small business to be eligible for other small business tax concessions.

A base rate entity is a company that has a turnover less than the turnover threshold – which is now $25 million (increased from $10 million) for the 2017-18 income year.  Please contact our office for further criteria.

Small Business – Immediate Write-off

The $20,000 instant asset write-off has been extended until 30 June 2018 (and 2019 subject to senate approval). This deduction is used for each asset that costs less than $20,000, whether new or second hand. You claim the deduction through your tax return, in the year the asset was first used or installed ready for use.

If you are a small business, you can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased and your annual turnover is less than $10million.

Capital gains and losses.

A capital gain arising from the sale of an investment property or shares and capital losses can be used to offset the capital gain. Specialist advice should be sought before making changes to your investments. Please contact our office for further information.

Remember the 30th of June falls on a Saturday.

Please keep in mind that the 30th of June is on a Saturday this year. Therefore, please make sure any contributions you want to make this financial year are received by your fund before the 29th of June. With electronic transfer (including BPay) the contribution takes effect the day your superfund receives the money, not the day you make the transfer.

Photo Credits  |  Photo by Brooke Lark on Unsplash |  Photo by Tyler Franta on Unsplash

US Presidential election

Originally created as email update Thursday November 10, 2016

On the heels of Brexit, Donald Trump’s election to the presidency of the U.S. marks the second significant populist outcry through the ballot box. Although we are concerned about Mr. Trump’s rhetoric on free trade and other policies, we believe that some of the positions expressed during the campaign may ultimately benefit U.S. economic growth. The immediate pronounced downward move across risk assets, however, denotes justifiable uncertainty, as do now diminished expectations that the Federal Reserve (Fed) will raise rates in December. The weeks and months ahead will be critical to determine and analyse policy priorities as an administration is assembled and lines of communication with Congress are established.

Despite the immediate market reaction, we believe risk assets may soon recover. In fact, after an initial drop on market opening overnight, the Dow Jones Index is up 1.4% for the session at the time of writing. Taking this in to account in addition to the lead from ASX futures this morning, we would expect the domestic market to rally upon opening.

With a divisive election season over, formulating policy now turns to the art of the possible. As the Republican Party will control both houses of Congress, a Trump administration should have fewer roadblocks to passing legislation. We expect priorities will be infrastructure spending and tax cuts. Both may serve as a hand off from accommodative monetary policy to the much-desired fiscal expansion that central bankers have long advocated for. An expansion of federal spending may provide sufficient support for the economy, allowing them to move toward rate normalization.

The outlook for select equity sectors may also be positive. The increased infrastructure spending promised by Mr. Trump will benefit the industrials sector. We are also moderately bullish on the financials sector, and anticipate that regulations in the sector could loosen at the margins. The energy sector could also outperform as Mr. Trump appears to be a greater advocate for U.S. energy exploration than was Secretary Clinton. We also believe that the outlook for the health care sector is more positive than it would be in the event of Secretary Clinton being elected, and that there is a low probability for sweeping changes in drug pricing legislation. Additionally, we do not believe that Mr. Trump’s campaign promise to abolish the Affordable Care Act will be feasible.
Trade protectionism is perhaps the biggest economic fear, as we could see stagflationary outcomes and a real risk to emerging markets, in particular Mexico and China. Expectations of inflation in the US have already turned and protectionism will accentuate those fears. Ultimately, monetary policy uncertainty, protectionism and fiscal easing are not a recipe for lower rates.Over the longer term, the stimulative fiscal initiatives of a Trump administration, along with growth that may be delivered from other policies, may lead to economic expansion conducive to equities. While an increase in fiscal spending could help accelerate growth, it would also exacerbate the already challenged U.S. fiscal position and limit the decline in Treasury yields. Accompanying such growth may be an increase in inflation that could put upward pressure on yields. However, given the interest rate differentials among developed markets, we believe such an upward move in Treasury yields would be capped as foreign capital continues to flow into higher-yielding U.S. securities.

The US electorate has voted for change, but it’s worth remembering that Trump’s stated policies have been somewhat thin and we are unsure which of his pre-election announcements will result in firm policy-making.

Australia’s Growth and Policy Outlook

For Australia, the key issue will be the impact of potential trade policies on China. Fears about the direct impact on China of these trade policies in the US should not be overstated. China has been moving towards a service driven economy, and has ample policy flexibility to boost domestic demand to partially compensate for any direct shock to exports to the US. The impact of global uncertainty on markets as well as business and consumer confidence is a much more specific issue for Australia. Until the new president sets out the specifics of his agenda, business and consumer confidence will likely falter in Australia.

As always, we will continue to closely monitor events and markets. We believe that now is not a time to panic and that markets have priced in this potential outcome. We may, in reality, identify buying opportunities in the shorter term.

Please contact your adviser if you would like to discuss in more detail.