Smart EOFY tax moves investors can still make
As June 30 approaches, investors can seize opportunities to save on tax, and reduce paperwork.
One of the biggest costs most investors face is tax. Now is the time to ask, "What are you left with after tax?"
Tax-efficient investments do exist. Investment bonds, for example, are 'tax paid'. The investment bond issuer, rather than the investor, pays tax on the underlying returns.
While tax is capped at 30%, issuers aim to enhance underlying tax efficiency.
If you make no withdrawals within the first 10 years, you don't need to provide details of the investment bond, or its returns, in your annual tax return.* After 10 years, any withdrawals you make are fully tax paid and free from personal tax.
Capital gains tax needs to be managed
Tax time can be a sharp reminder of the impact of capital gains tax (CGT).
This is another area where investment bonds can deliver worthwhile tax advantages. No personal CGT applies to withdrawals or switches between investment options within an investment bond.
An investment bond can also be transferred to anyone, including a partner, trust or adult child, without triggering a personal CGT event.
Don't overlook super, but beware of potential tax traps
For many Australians, concessional super contributions provide an incentive to contribute to super and grow their future retirement nest egg.
The maximum level of concessional contributions you can make is $30,000 for 2025-26, increasing to $32,500 for 2026-27. This amount includes your employer's compulsory superannuation guarantee contributions plus any salary sacrifice contributions.
However, there are important limitations to be aware of.
If your income and concessional super contributions exceed $250,000, Division 293 may apply. This results in an extra 15% tax on the lesser of your concessional contributions or the amount above the threshold. Planning ahead is essential.
For Australians affected by Division 293, or the new Division 296 tax on earnings on total super balances above $3 million, investment bonds are proving to be a popular, tax-friendly alternative.
More importantly, investment bonds should be viewed as working alongside your other savings options, not replacing them. Always speak to a financial adviser for personal advice ahead of tax time.
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*Investment bonds are 'tax paid' if held for at least 10 years without any withdrawals, and where the 10-year period has not been reset.
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