EOFY contributions – reduce tax and enhance your wealth

With EOFY quickly approaching, now is an important time to leverage tax-effective strategies and superannuation contribution opportunities. For business owners,  high-income earners and pre-retirees, strategic planning before June 30 can significantly reduce your tax liability while accelerating your wealth-building goals. Pre-retirees in particular can benefit from maximizing contributions to superannuation, ensuring a robust nest egg for retirement. Below are some key opportunities to consider.

1. Maximise Your Superannuation Contributions

Superannuation remains one of the most tax-effective vehicles for building wealth, especially for high-income earners and business owners. For the 2024/25 financial year, the contribution caps are:

• Concessional Contributions: Up to $30,000 per year (or more if you’re eligible for carry-forward provisions). These include employer contributions (e.g., Superannuation Guarantee), salary sacrifice, and personal deductible contributions.
• Non-Concessional Contributions: Up to $120,000 per year, or up to $360,000 over three years using the bring-forward rule (if you’re under 75 and meet eligibility criteria).

Why It Matters: Concessional contributions are taxed at just 15% (or 30% for very high earners), compared to your marginal tax rate, which could be as high as 45%. Making personal deductible contributions can reduce your taxable income, providing immediate tax savings. High-net-worth individuals can use the bring-forward rule to move significant wealth into the tax-advantaged super environment, especially if nearing retirement.

Action Tip: Review your year-to-date contributions and consider making a personal deductible contribution before June 30. For pre-retirees, check eligibility for the catch-up concessional rule to make a substantial concessional contribution, particularly if you’ve sold a business or other assets.

2. Utilise Carry-Forward Concessional Contributions

If you haven’t fully utilized your concessional contribution cap in previous years, you may be able to “carry forward” unused amounts, provided your total super balance is below $500,000 as of June 30 of the previous year.

Unused cap amounts are available for 5 years and expire after this. For example, a 2019–20 unused cap amount that is not used by the end of 2024–25 will expire.

The oldest available unused cap amounts are carried forward first. For example, unused cap amounts from 2019–20 would be used to increase your cap first before unused cap amounts from 2020–21.

This is a powerful strategy for business owners or people with fluctuating incomes due to bonuses. It can also be an excellent tax saving strategy for people who have recently sold assets (ie. investment property) and are wanting to offset large capital gains.

Why It Matters: Carry-forward contributions allow you to make larger tax-deductible contributions in a single year, reducing your taxable income significantly. This is especially useful for pre-retirees aiming to boost super balances before transitioning out of the workforce.

Action Tip: Check your total super balance as at 30/06/2024 and unused cap amounts with your accountant, or check your ATO portal via mygov. It is important to discuss contribution strategy with your financial adviser to ensure you are not breaching any of the contribution caps.

FY2019-20 unused cap space amount will expire after 30/06/2025, so consider if you would like to maximise this cap while you can.

Plan contributions early to ensure funds clear before the EOFY deadline.

3. Spouse Contributions for Tax Benefits

For higher earning individuals or business owners with a lower-earning spouse, making a spouse super contribution can be a smart move. You may be eligible for a tax offset of up to $540 if your spouse earns less than $40,000 per year and you contribute up to $3,000 to their super.

Why It Matters: This strategy not only reduces your tax bill but also helps balance superannuation savings between partners, ensuring both are well-prepared for retirement.

Action Tip: Confirm your spouse’s income and contribution eligibility, and make the contribution before June 30 to claim the offset in this financial year.

4. Plan for Government Co-Contributions

If you or your spouse earns a lower income in certain years (e.g., under $60,240 for 2024/25), making a non-concessional contribution to super may qualify you for the government’s co-contribution scheme, which provides up to $500 for a $1,000 contribution.

Why It Matters: This is a low-effort way to boost super savings, particularly for business owners with variable incomes or spouses with part-time work.

Action Tip: Confirm eligibility based on income and make a non-concessional contribution before the EOFY.

5. Leverage the Small Business CGT Concessions

If you’re a business owner contemplating selling a business or restructuring, the EOFY is an ideal time to explore small business capital gains tax (CGT) concessions. These concessions can significantly reduce or sometimes eliminate tax on the sale of business assets, with surplus funds potentially directed into superannuation.

• 15-Year Exemption: If you’re over 55 and have owned the business for 15+ years, you may be exempt from CGT entirely.
• Retirement Exemption: Up to $500,000 of capital gains can be contributed to super tax-free (subject to contribution caps).
• 50% Active Asset Reduction: Halve your taxable capital gain on eligible business assets.
• Rollover Relief: Defer CGT by reinvesting proceeds into another business.

Why It Matters: These concessions are particularly valuable for business owners looking to transition into retirement or diversify their wealth. By strategically timing asset sales and contributions, you can maximise super balances while minimizing tax.

Action Tip: Consult with your accountant and financial adviser to assess eligibility for CGT concessions and align contributions with your retirement goals. Timing is critical—ensure transactions are finalised before June 30.

Get Good Advice

At P3 Financial Planning, we understand the unique needs of business owners, high-income earners and pre-retirees. Our tailored financial planning services help you navigate complex EOFY opportunities, from super contributions to CGT concessions and investment structuring. We work closely with your accountant to ensure seamless execution, maximising your wealth while minimising tax.

Next Steps:

• Book a Consultation: Contact us today to schedule a no-obligation consultation and discuss your EOFY strategy.
• Review Your Finances: Bring details of your financial position so we can identify opportunities specific to you.

Act Before June 30: Many of these strategies require action before the EOFY deadline—don’t miss out!

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Disclaimer: This information is general in nature and does not consider your personal circumstances. Consult with a qualified financial planner and tax advisor to ensure these strategies are suitable for you. Contribution caps and tax rules are based on 2024/25 Australian Taxation Office guidelines and may change. Always verify current regulations.