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Get 2024/25 off to a great start

The beginning of the financial year is a great opportunity to review your financial situation, to make sure you’re on track and on top of changes happening across tax and superannuation. Here are five areas that you may wish to review early this financial year.

1: Make your tax savings work for you

The personal tax cuts commenced on 1 July 2024 which may mean you pay less tax and have extra cashflow, and it’s important to think about the best way to make the extra dollars work for you.

If you are an employee, you may have already noticed an increase in your take home pay as less tax is withheld each pay period by your employer.

You may need the savings to meet regular household expenses and manage cost of living increases but if you have capacity, there are ways you may be able to use the tax savings to improve your financial position, such as reducing debt, increasing your cash reserve, investing for the future or boosting your super balance.

Even small amounts can make a difference over time. If you’re able to reduce your debt, you’ll have indirect savings by reducing the amount of interest you are paying. If instead you choose to build up your savings, the right option to do this depends on a number of things including:

whether your investment goal is short term or long term
based on how long you have to invest, what you would like to invest in (e.g. term deposits, shares and/or property)
whether you need access to these funds at a particular time (e.g. super savings can generally only be accessed once you retire after age 60).

The key is to make a conscious decision to put your tax savings to work in a way that suits you best.

To estimate your tax savings for this financial year, check out the Government’s calculator at taxcuts.gov.au.

2: Review your concessional super contributions strategy

Concessional contributions include:

contributions that your employer must make for you (Super Guarantee or ‘SG’ contributions)
salary sacrifice contributions (which are contributions from you pre-tax salary), and
personal contributions that you claim as a tax deduction.

A limit applies to the concessional contributions that you can make without having to pay extra tax. This is known as the concessional contributions (CC) cap. From 1 July 2024, the annual CC cap increased from $27,500 to $30,000. In addition, the rate of SG contributions that employers must make increased from 11% to 11.5%.

Therefore, the beginning of the financial year is a good time to review your super contributions strategy to ensure it continues to be right for you. This includes taking into account the increased CC cap and SG rate to ensure you do not exceed your CC cap. It could also mean starting or reviewing a salary sacrifice arrangement with your employer if you’re able to direct some of the additional income from the 1 July tax cuts towards saving for retirement.

Your CC cap may be limited to the annual cap or may be higher if you have unused concessional contributions from the last five financial years and meet other eligibility rules. These are called unused carried forward contributions. See ato.gov.au and search ‘concessional contributions cap’ for more information.

3: Could you benefit from the increase in the non-concessional contribution cap?

Non-concessional contributions are contributions you make from after tax income or existing savings.

The non-concessional contribution (NCC) cap increased from $110,000 to $120,000 on 1 July 2024. If you’re eligible, you may be able to ‘bring forward’ some of your NCCs from the next one or two financial years, meaning you could make even larger contributions today. The increase to the annual cap also means that the maximum amount under the bring forward rule increased from up to $330,000 to $360,000.

Like CCs, eligibility rules apply to NCCs. This includes limits on your total super balance, NCCs you may have made in previous financial years and your age.

Remember that investing in super has the benefit of earnings being taxed at 15% compared to your marginal tax rate which could be up to 47% (including Medicare levy). However, access to these savings is restricted generally until you are retired after age 60.

4: Submit your notice of intent to claim tax deduction for personal super contributions

If you made personal contributions in 2023/24 and intend to claim a tax deduction, don’t forget to give your super fund your notice of intent and receive an acknowledgement before you lodge your tax return for 2023/24. You must lodge your notice of intent no later than 30 June 2024 if you haven’t lodged your tax return by that point.

You also need to lodge your notice of intent before you commence a retirement phase income stream, rollover or make a withdrawal from your super account. This includes personal contributions you have made since 1 July 2024 that you wish to claim as a tax deduction.

The timeframes are very specific and there is no discretion if these are missed, which means it could impact the tax deduction you are able to claim from these contributions.

5: Review your estate planning goals

Just like many aspects in your life, your estate planning needs to be reviewed on an ongoing basis. Your Will and Enduring Power of Attorney should be updated to reflect any changes to your finances, investments, family and goals. Reviewing your estate plan ensures that it:

aligns to your goals, and
directs your assets to the right beneficiaries at the right time.

Some key life changes that may impact your estate planning include:

getting married
having children
a change in relationship, such as separation or divorce
acquiring or selling assets
building your savings (including superannuation).

Superannuation doesn’t automatically form part of your estate, which means unless you take certain action, you can’t rely on your Will to determine who’ll receive your superannuation balance when you pass away. Your super fund may allow you to make a death benefit nomination to people who are eligible beneficiaries under superannuation law. Eligible beneficiaries include your spouse, children and certain other dependants. You can also nominate your estate if you want to make provision in your Will to distribute your super balance.

Each super fund has rules about the types of nominations that you can make and other requirements for the nomination to be valid. If you make a binding nomination, the trustee of your super fund must follow your instruction if the nomination is valid and hasn’t lapsed at the time you pass away. However, if your nomination isn’t binding or isn’t valid (e.g. because the person you’ve nominated isn’t an eligible beneficiary or you haven’t followed the requirements of your fund when making your nomination), your super fund will decide what to do with your superannuation if you pass away.