Australia: Will you get the most out of this financial year?

With the end of the tax year just two months away, Aviva is encouraging investors to examine their finances to ensure they take the right action now in order to maximise their wealth creation opportunities before time runs out.

By considering a few issues you can ensure the right decisions and actions are made before 30 June.

Checklist:

• Are you, or a family member, eligible for the Government’s Co-contribution scheme – should you, or they, make a member contribution to qualify?
• Should you make a spouse contribution to your partner’s superannuation fund?
• Examine your personal superannuation contributions – will your contributions or your employer’s reach your age based limit?
• Consider Choice of Fund – would you be better off changing super fund for employer contributions?
• Investigate Capital Gains Tax treatment before selling shares or assets – a sale in June may cost you more than you realise.
• (If you are a pensioner) Has the value of your assets changed? If so, collect new values to advise Centrelink or investigate a Term Allocated Pension
• See your financial adviser

"This is the time of year to concentrate on future financial strategies – don’t leave it until June to make decisions. Finish the financial year right by ensuring all plans have been followed and that you know what you are going to do next year," says Navigator’s chief operating officer, Grant Salmon.

Two immediate changes will be relevant for many earners: tax rates have been adjusted in 2004/05, providing some relief for high income earners, and the Federal Government has widened the availability of the co-contribution scheme for 2004/05.

The co-contribution scheme is designed to encourage Australians to make personal contributions to their superannuation fund by providing ‘free money’ for those who take up the offer by making after-tax personal contributions. Low to middle income earners can contribute $1,000 and receive up to $1,500 from the Government – even the spouse of a higher income earner can benefit.

"But remember any superannuation contributions can only be considered if you have paid them before 30 June," comments Grant.

"If you, or anyone in your family, can benefit from the Government’s co-contribution then now is the time to seriously consider acting on this initiative which quite simply is about improving your retirement. Make the most of this Government benefit when you can," comments Grant.

Also, if your spouse’s assessable income will be less than $10,800¹ you can claim an 18 percent tax offset on up to $3000 you contribute tho their superannuation.

Remember, earnings within superannuation are taxed at a maximum of 15 percent - plus in some cases lump sum tax, depending on amounts and age. This is still lower than many people’s marginal tax rate, which could be as high as 47 percent (plus 1.5 percent Medicare Levy).

The new financial year also brings the introduction of ‘Choice of Fund’, where many Australians can make the decision on which superannuation fund receives and manages their employer’s superannuation contributions for them.

"Almost five million employees will be able to choose where they want their superannuation to be paid – and if you are one of those it’s important to know all your options and needs before making a decision," says Grant.

Historically the end of the financial year sees investors looking to off-load investments. However, before doing this it is essential to be aware of possible Capital Gains Tax (CGT) treatment. This financial year may not be the best time to look at selling shares or other assets as you may be hit for a large CGT bill, depending on your other earnings and the length of time you have held that asset.

"This is not the time of year to be making rash decisions about what to sell and buy – it’s important to at least consider what will happen for you in the year ahead. CGT is a highly complex area and it’s certainly worth receiving advice on managing your taxation liability," said Grant.

It may also be the time to start considering your budget for the year ahead. Take the time to look at your incomings and outgoings and the best way to structure those to make the most of all your funds. It may be the time to consider the benefits by ‘extreme’ salary sacrifice into superannuation in the next year (bearing in mind the potential impacts of contributions surcharge and the age based limit).

"Before the end of the financial year is a great time to take stock of everything – even your place in the workforce. If you are able to arrange the date of your retirement, it is important to try to retire at the right time of the year to maximise your benefits.

People who are looking at retiring in the near future need to consider the timing of their departure from the workforce. By waiting until early in the new financial year you may reduce the amount of tax required. (And from 1 July this year, there will also be the new ‘transition to retirement’ option to consider for those over 55).

And for those who are already in the retirement phase of life, realising the value of your assets may affect your Centrelink payments. The pros and cons of taking a Term Allocated Pension, which is only counted at 50 percent asset value by Centrelink, is worth looking into," says Grant.

A financial adviser can assist in creating a financial plan which takes all your needs into account, including superannuation, investments or the sale of assets.

¹Amount phases out for assessable income from $11,800 up to $13,800

For further information please contact:
Simon Morgan
Group General Manager Public Affairs
Phone: (03) 9829 8892
Mobile: 0407 966 632

Notes to editors:

• Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners is the Australian funds management arm of Aviva plc. Through these companies we provide products and services in the areas of wealth creation and wealth protection for more than 300,000 customers throughout Australia.
• Globally, Aviva Australia is part of Aviva plc, the world’s fifth largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
• Aviva is a leading provider of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of A$74 billion, and more than A$592 billion of assets under management (as at 17January 2005). The group has more than 51,000 employees and 30 million customers worldwide.
• The information in this document reflects Navigator Australia Limited's ('Navigator’) understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person and it is not a substitute for professional advice. Applications to invest in a financial product issued by Navigator, or any of its related entities, must be made by completing the application form attached to the applicable Product Disclosure Statement ("PDS"). A PDS is available from Navigator or your financial adviser. Before making an investment decision on the basis of the information above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the information is appropriate in the light of their particular investment needs, objectives and financial circumstances. Aviva does not receive any remuneration in relation to the provision of information available from this press release which is of a general nature only.