MASTERCLASS Investment - 8 Investment Strategy Review Tips - End of financial year

May and June is a good time to review your investment strategy before End of financial year (EOFY) – an important? stage for the investor, as SOME actions MUST be taken before 30 June!!

Here are 8 tips for end of year investment planning to set you up well for the end of financial year.

1. Review Portfolio

Review the ASSETS & the RETURN achieved, against your investment strategy and goals – are they in line?

2. Consider how your investments are structured

Before purchasing an investment, it is important to get advice and consider how you will OWN the investment. Common structures include individual ownership, joint ownership, SMSF etc, however structures such as Super SMSF, discretionary (family) Trusts and Companies are often miss-used or ignored.

Consider - the investment type, the expected return, the expected size of the investment and also the end goal of the investment before deciding on a structure, as ownership can have a big impact on how it is taxed both now and into the future.

3. Capital Gain offset by concessional contributions

Have you have made a capital gain - you may be able to reduce how much CGT you will have to pay (or more precisely, how much tax you have to pay for the entire year) by making concessional contributions. For example, if you have made a capital gain of $50,000 (reduced personally by 50% to $25,000 for assets held longer than a year for individuals), then a concessional contribution (CC) will generally reduce your taxable income and might allow you to pay less tax on your capital gain, particularly if it reduces your marginal tax rate. But, in any case, a $10,000 CC could save your tax return of up $4700 tax, while you’ll pay a maximum of 23.5% on the capital gain itself.

4. Capital Loss & Gains – solidify before 30 June

Consider disposing of investments that have experienced a capital loss which is not recovering and/or does not fit in your portfolio anymore. This loss can be used to offset any capital gains you have realised this financial year.

5. Capital gains tax relief in pension mode in SMSF

If you had more than $1.6m in pension or transition-to-retirement pension (from 30/6/17), then you were able to potentially take advantage of the CGT relief provisions when selling down assets to meet the Cap., to soften the blow of the new transfer benefit cap (TBC), of $1.6m (increases each year)

Those decisions need to be made soon, if they have not been made yet, before 30 June.

Note - The action required is rarely portfolio-wide, but should be made asset by asset. There will be assets in most portfolios where you want to apply for the CGT relief, while other assets (potentially, where you’re sitting on losses) where you don’t want the CGT relief, so that you can use a future CGT loss to offset other gains.

It is a complex decision-making process, which might go down to evaluating each parcel of a particular share that you bought over an extended period. Don’t leave this complex work until too close to the deadline - sit down with your adviser and/or accountant to work through this process, sooner rather than later. See ATO Here.

6. Bring-forward deductions/expenses

Bringing forward deductions (expenses) are a great way to reduce your tax liability for the current financial year. Examples of this are investment subscriptions, pre-paying interest payments on investment loans or paying an annual premium payment for your Income Protection cover.

7. Defer taxable income

You may be able to defer income until after the 1st of July, as a useful strategy. This could involve delaying the sale of an asset or considering when fixed term investments will mature.

8. Property Investments

(a) Interest that is part private? – ideally, a separate loan for the investment and private portion saves more work at tax time.

(b) Conveyancing and purchase costs are not deductible, they are part of the cost base for capital gains tax purposes.

(c) Do minor repairs that can be immediately written off before they become major and possible capital repairs (and need to be depreciated) – eg we had a tap that come loose at the base in the upstairs powder room, and a small water leak had developed under the sink. The water travelled to the downstairs study, and took weeks to show by a small stain in the roof plaster in the study. The tenant took weeks to tell us. We thought it was the shower in the ensuite directly above, but the plumber later found it was the powder room sink tap! Renovating the shower would costs several thousand – which was considered capital expense, fixing the tap, and roof plaster was directly deductable.

(d) Rental property visit costs – are no-longer claimable from 1/7/17 tax years onwards like inter-state trips).

(e) Delay large item purchasing, as they are generally depreciated, not immediately deductible – like a new oven, hot water systems etc.

Thinking you need help with your SMSF administration and accounting and timely lodging/compliance?

Call us 0407 361 596 to Connect Assist and Help you.

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