Not surprisingly, our minds tend to focus most on our tax affairs in the final two or three months of a financial year.

This involves many people hauling out boxes of receipts for the 12 months leading up to June 30. These days, of course, many more of these receipts are likely to be stored online.

Despite this extra concentration on tax towards the end of a financial year, tax professionals typically advise taxpayers to treat tax-planning as a year-round activity. This is opposed to regarding it as a last-minute endeavour for taxpayers’ to try to improve their positions before tax returns are due.

Investment is one of the key areas warranting an all-year focus on efficient tax-planning.

Countless investors underestimate the impact of tax on their investment returns, particularly when markets have been rising. Yet taxes - along with investment management costs - can have a huge impact on an investor’s real returns.

In short, the lower your costs (including tax), the greater your share of an investment’s returns.

One of the attributes of index-tracking exchange-traded funds (ETFs) and unlisted indexed funds, for instance, is their potential tax efficiency.

ETFs and index funds typically buy and sell securities less frequently than many actively-managed funds. In turn, a lower turnover of securities by a fund helps keep capital gains tax to a minimum.

Many investors choose to hold ETFs and traditional index fund investments in a superannuation fund, further enhancing the tax attributes of these investments.

Superannuation, of course, provides a series of opportunities to keep tax costs down. Salary-sacrificed contributions are taxed at 15 per cent rather than at marginal tax rates, and a super fund’ income is taxed at a maximum of 15 per cent, with the capital gains taxed at 10 per cent.

And superannuation assets backing the payment of a superannuation pension are not subject to tax, and pensions or lump sums paid to members over 60 are not taxed in their hands.

Investors should not underestimate the degree of control that they can have over their investments costs, including taxes.

This article represents a general view, so we encourage you to contact Southern Advisory to seek financial advice before making investment decisions.

Source: Smart Investing™ written by Robin Bowerman, Vanguard Australia

What you can consider before 30 June 2014 to help your super work harder for you... 


1.       Consider a one-off deposit to your super

'After-tax' contributions are those where you add money to your super account after you have already paid income tax on it, for example making a payment directly from your bank account.

It can be advantageous to invest through your super instead of outside super. Money you invest into your super from your after-tax income doesn't get taxed on the way in because you've already paid tax on this money. Instead, you pay a maximum of 15% tax on any earnings you make in your super account, rather than paying tax at your marginal tax rate as you would if it was sitting in a bank account, which could be up to 45%.

2.       The low down on Government co-contributions

The Government co-contribution scheme is, an initiative formed by the Government to give you money! If you earn less than $48,516pa you may be eligible for the scheme, which could see your after-tax super contributions matched by 50% up to a maximum of $500 by the Government as an incentive for Australians to make a bigger commitment to their super savings.

How does it work?

Eligible Australians who earned less than $33,516 in the 2013/2014 financial year will receive 50 cents for every dollar (up to a maximum of $500) of after-tax money that they contribute to their super account. People who earn over that amount have their Government co-contribution reduced by around three cents for every dollar over that amount, until it reaches zero at $48,516.

3.       Contributing to your spouse’s super

In a relationship there are often times when one person will be earning significantly less than the other – for example when one partner has scaled back their working hours or has taken some time off work to care for a child at home. That's why the Government introduced the spouse super contribution tax offset, allowing higher-earning taxpayers, who contribute super for their non-working or low-income earning partners to be eligible for a tax break.

4.       Salary Sacrifice to top up your super

What is salary sacrificing?

A salary sacrifice arrangement is also referred to as salary packaging or total remuneration packaging. "Salary sacrifice is an arrangement where you agree to forego part of your future salary or wages in return for your employer providing benefits of a similar value". (ATO)

Salary Sacrificing Super

Salary sacrificing super contributions is an excellent way to boost your super and build a healthy long-term investment. Salary sacrifice contributions count towards your concessional contributions cap, as do any super contributions made for you by your employer. For the 2013/14 financial year the concessional contributions cap is $25,000, unless you are 60 or over when a cap of $35,000 will apply. Any contributions made above this cap will attract additional tax.

Benefits of Salary Sacrificing Super

As well as boosting your super, salary sacrificing super contributions can also provide a tax benefit.

For more information on minimising your tax and maximising your super cap for the 2013/14 year Contact Us at Southern Advisory to discuss your personal situation.

Source: www.bt.com.au