Timing can be important: HLB Mann Judd Sydney

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While trying to judge market timing is fraught for investors, there are other events where timing can have a significant impact on personal wealth, such as tax obligations, advises Michael Hutton, head of wealth management at HLB Mann Judd Sydney.

“As we approach the end of another financial year taxpayers, particularly those whose employment status is going to change, should look at which year their income is going to be taxed, and whether they have any influence over changing this timing.

“For example, although there are now limited tax benefits in the treatment of employment termination payments, anyone considering leaving their job towards the end of the financial year could find it beneficial to have the date of departure, and the termination payments, fall in the next tax year where lower personal tax rates may apply.

“This could be attractive for anyone leaving full time employment to become self-employed, or to anyone retiring around the end of this financial year.

“Working for four or five months in the new financial year can often work particularly well and result in a tax refund when next year’s tax return is lodged, as tax has been with-held at a rate that assumes you will be working for the full year.”

Mr Hutton added that people who are retiring with a bona fide redundancy payment should try to receive this before they turn age 65, as if they do part of the payment may be tax free.

“Another area where age can make a significant difference is in the timing of final superannuation contributions.

“If you are under age 65 at the start of the financial year, it is possible to still make up to three years’ worth of non concessional (tax free) contributions that year.

“On the other hand, once you are over age 65 you must satisfy a work test to contribute to super,” he said.

Mr Hutton said that there are a number of other areas where timing can affect the tax liability.

“Another example is the way the after tax amount of bonuses can be affected according to which financial year the payment is made – especially for those about to retire or who are starting transition to retirement strategies,” he said.

HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.

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For more information please contact:

Michael Hutton – Phone: 02 9020 4193

4 April 2013