Posts Tagged ‘EOFS’

How to make insurance more affordable at tax time

Monday, June 27th, 2016

piggy bankDid you know you can save money by buying your insurance in super? This is because super can offer both cash-flow benefits and tax concessions.

Most super funds offer insurance that can help you, or your dependants replace your income if the unexpected was to happen. This includes Life, Total and Permanent Disability (TPD) and Income Protection insurance.

While these types of insurance can also be bought outside super, you’ll have to fund the premiums from your own cash-flow and you probably won’t get any tax breaks if you buy Life and TPD insurance.

On the other hand, when you insure inside super, the premiums are deducted from your super balance. This means you can arrange the amount of cover you need without having to pay the premiums from your cash-flow.

This may mean you’ll use up some of your super money which could help you meet your living expenses in retirement and while this could make a difference when you’re no longer working, it’s important to think of what could happen to your family’s lifestyle in the meantime if you don’t have the right level of cover.

If you or your family faced financial difficulty you could run out of savings very quickly, well before your intended retirement date. So insuring in super could be a great solution if you don’t have enough cash-flow to pay for the premiums.

Even if you think you could pay the premiums outside super, there are still cost-effective benefits of insuring inside super. This is because if you make super contributions, there are some tax concessions, regardless of whether the contributions are used to buy insurance. For example:

  • if you’re an employee and eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars
  • if you earn less than 10% of your income from employment (eg if you’re self-employed or not employed), you can generally claim your super contributions as a tax deduction, and
  • if you earn less than $49,488 each year, of which at least 10% is from employment or a business, and you make personal after-tax super contributions, you may be eligible to receive a Government co-contribution of up to $500 in 2014/2015. That could help you cover the cost of future insurance premiums.
    To find out more about insuring inside super, please contact our office.

Source: MLC

Self-employed? Here are three things you should do before end of financial year

Friday, April 22nd, 2016

hand holding bag of moneyIf you’re self-employed, here are three ways to make tax time easier — and maybe save money too.

If you’re one of the two million or so self-employed Australians out there1, you’ll know how time-consuming the end of the financial year (EOFY) can be. So the earlier you get organised, the easier it will be when tax time comes around.

1. Understand what you can claim

As a self-employed person, you can claim expenses that many employees can’t. However, they must be bona fide business expenses — and you’ll need the receipts and paper-work to prove it. For example, you can claim:

· Petrol — but only for work-related travel, and you’ll need to keep a logbook.

· Travel expenses — but you’ll need receipts, and the trip needs to be genuinely for business (and for more than one day).

2. Top up your super

According to the Australian Super Funds Association (AFSA), in 2012 nearly 25% of self-employed Australians had no super whatsoever2. This could lead many to suffer financial hardship in retirement.

So make sure you make contributions yourself. You can contribute up to $30,000 (or $35,000 if you were aged 49 or older from June 30, 2014)3. Remember, if you’re self-employed, you may be able to claim all your super contributions at tax-time — but do it before the end of the financial year.

3. Protect your income (it’s tax effective)

If you work for yourself, you’re not entitled to Workers Compensation. So it’s worth taking out income protection insurance to protect your income from the risk that illness or injury may put you out of action for a while.

Generally, the premiums are tax-deductible, making them more affordable. You may also be able to buy income protection insurance (and life insurance) through your super fund.

Advice can help

Running your own business, while rewarding, can be time-consuming and complex — so it makes good business sense to get advice.

1 Independent Contractors, Independent Contractors: How Many? (Australia), November 2013 and Australian Bureau of Statistics 6359.0 – Forms of Employment, Australia, November 2013
2 ASIC, Smart Money, Self Employed People, January 2015
3 ATO, Concessional contributions cap, December 2014
Source: MLC

Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 20 March 2015.

Article prepared by Infocus Securities