The EOFY is coming, but what about your personal planning

As the end of the financial year approaches in Australia, it’s a good time to take a closer look at your personal finances to ensure that you have a clear plan for the year to make the most of your opportunities to improve your financial position.
This article is the 4th in our year end tax planning series. We have previously outlined, why you need to conduct an EOFY tax planning session, What to do with your profit and most recently, What you need to consider for next financial year. All of these articles focus, quite rightly, on your business, but what about your personal circumstances? In this blog article, we’ll explore four key areas that you should focus on in your end-of-year tax planning: debt management; superannuation, insurance review, and even estate planning.

Debt Management

With interest rates much higher now, managing your debt is an important part of your financial plan, and there are several strategies you can use to reduce your interest costs and pay off your debt more quickly. Here are some key areas to consider:

Make sure you have the right finance for right purpose and right time frame!
Consolidation: If you have multiple high-interest debts, such as credit card balances or personal loans, consolidating them into a lower-interest loan can help you reduce your interest costs and simplify your repayments. But please ensure you keep deductible debt and non-deductible debt/loans separate to avoid having to pro-rata interest amounts.
Refinancing: If you have a mortgage, refinancing to a lower interest rate can help you save money.
Prioritise paying off non-deductible debt first eg home loan before investment property loan. Strategies can include making investment loans “Interest Only” (albeit at a slightly higher interest rate); and using borrowed funds (line of credit) to fund major property expenses and using the cash to pay off your home loan instead.

Our accountants & financial advisers can help you with strategies to reduce your debt faster. Just give us a call.

Superannuation

Superannuation is a tax-effective way to save for your retirement, and contributing to your super account can also help you reduce your tax liability. If you’re not already contributing a bit extra to your super, now could be a good time to start.

Subject to age limits and work tests, people can have concessional (before-tax) super contributions of up to $27,500 per year for 2023 & 2024 Financial Years. This amount includes any employer contributions but means that there may be opportunities to either salary sacrifice some extra super contributions; or make a personal contribution direct to your super fund yourself and claim in your personal tax return. Concessional Super contributions are taxed at 15% when they go into the super fund and if your Adjusted Taxable Income is over $250,000 then your contributions get taxed an additional 15% but either way, that’s usually better than your marginal tax rate of 19% – 47%.

If you don’t need a tax deduction for your contributions and/or have some spare cash, people under 75 with a Total Super Balance below the cap ($1.6M – $1.9M), can make personal non-concessional (after-tax) contributions of up to $110,000 per year (as of 2022-2023).

Other ways to get more money into super to reach your retirement goals include:

Co-contributions from the government if you’re a low or middle-income earner;
Making contributions for your low-income spouse and getting a tax offset in your return; and
Spouse Super Splitting to even up your Super Accounts if one of you is getting close to the Total Super Balance Cap.

It’s also a good time to review your investment strategy and asset allocation to ensure that your super is invested in a way that aligns with your long-term goals.

Because of the complexity of the Super rules, and the fact that your money is locked up till you meet a “condition of release”, if you’re unsure where to start or what the best strategy is for you, consider having a chat with one of our Everalls Wealth Management Financial Planners to make sure you are on the right track to achieving your financial goals.

Insurance Review

Personal insurance is an important part of your financial plan, and it’s important to ensure that you have adequate coverage for the needs of you and your family. Here are some key areas to consider when reviewing your insurance policies:

Life & TPD insurance: If you have dependents who rely on your income, life insurance can provide financial protection in the event of your death or TPD. Consider whether your coverage is sufficient to meet your family’s needs.
Trauma/Critical illness insurance: This type of insurance provides a tax free lump sum in the event of a serious accident or diagnosis. That money can be used to fund things like out of pocket medical expenses; living expenses until your Income Protection waiting period has been met; house renovations eg wheelchair access; and even time off for your spouse to look after you while you recover.
Income protection insurance: If you’re unable to work due to illness or injury, income protection insurance can provide a regular income stream to help you meet your living expenses. Consider whether your coverage is sufficient to meet your needs and whether any exclusions or waiting periods apply.
Health insurance: Private health insurance can provide additional benefits beyond what’s covered by Medicare. Consider whether your policy is providing the coverage you need and whether you’re eligible for any government rebates or incentives.

As people age they obviously more likely to have health issues but they have also usually built up reasonable retirement savings and/or have other investments. So, with premiums growing exponentially as we age, sometimes it is worth considering when you don’t need insurance any more because, if something happens, you may be able to simply sell some investments or “retire early” so you and your family can use your superannuation money to fund living expenses or reduce debt.
If you would like some assistance reviewing your insurance talk to one of our Everalls Wealth Financial Planners. We can turn off commissions on insurance policies we manage as part of a client’s Financial Plan too!

Estate Planning

Estate planning is the process of arranging your affairs to ensure you and/or your family are looked after if something happens to you. It’s an important part of your overall financial plan, especially if you have significant assets or dependents. Here are some key areas to consider when reviewing your estate plan:

Will: Your will is a legal document that outlines how your assets will be distributed after your death. It’s important to ensure that your will is up to date and reflects your current wishes.
Power of attorney: A power of attorney is a legal document that appoints someone to make financial or legal decisions on your behalf if you’re unable to do so. Many people underestimate how important this document can be at any age. If something happens and you can’t make decisions (temporarily or permanently) this document will appoint the right person to look after you, your personal care and financial decisions. Every year we have a few clients lose mental capacity due to issues like dementia. It is so much easier to help them when there is a POA in place and it saves the time, cost and hassle of getting a court appointed one. So, please consider whether you need to appoint a power of attorney and who you would like to appoint.
Trusts: A trust is a legal arrangement where one or more people hold assets on behalf of someone else. Trusts can be used for a variety of purposes, such as protecting assets from creditors or providing for minor children. Consider whether you need to establish a trust and what type of trust would be most appropriate for your needs eg Family, Testamentary or Life Interest.

There are many activities that you need to undertake as a business in the lead up to the end of the financial year. Don’t miss out on the opportunity to revisit your own personal circumstances. Our team can assist not only with your business end of year tax planning strategy and activities, but can also help you with revisiting your own personal financial circumstances.

Why not book a consultation now?

Our financial arm, Everalls Wealth Management, works seamlessly with the accounting team here at DFK Everalls. It’s a partnership that works to benefit you. Contact us now