7 ways to protect and grow your wealth before the end of financial year

Current as of 29 April 2021

We have found when it comes to money, business owners face some common challenges:

  • They are so focused on their business they forget to ‘throw money over the fence’ for their family.
  • Whilst their business forges ahead their personal wealth gets left for dust.
  • They are often under-insured, under-protected, under-diversified and under-invested in the personal world.
  • They suffer from analysis paralysis. They are overwhelmed with options and worried about making a money mistake. So, they get stuck, do nothing, and go back to running their business.
  • They are often waiting for a big event, like the sale of their business to start focusing on their personal wealth, rather than making small regular decisions to get their money momentum underway.
  • They use the ‘I’ve got no time’ excuse to consistently do nothing for their personal finances. By the way, that is why we are here. It is our job to get your money sorted and a wise woman once said:

“If you have a problem, and you have enough money to solve that problem – you don’t have a problem.”

When it comes to money anything is possible – it is just a question of what you are prepared to do to make it happen.

It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” —Robert Kiyosaki

The reality is hat money results are driven by only two things. Priorities and the momentum which comes from the compounding impact of time and money. When you prioritise your money success you start building momentum. The key then is to leverage that momentum to keep driving bigger and better outcomes.

So, where to start?

Right here, right now. It is the end of April. Time to work with your financial adviser to tidy up loose ends for the 2021 financial year, so that you are off to a fresh start for 21/22.

Here is your clean up to do list:

  1. Transfer Money Out of Your Business Over to Your Family

Now is the time to start thinking about paying a dividend out of your company into your family entity. If your business needs cash, you can lend the money back to your business and become a secured creditor. This strategy places your family ahead of unsecured creditors in your business in the event of default. Ensure you talk to your S & W client manager to determine whether the timing of this dividend is to be before 30 June or in July.

  1. Rework Your Investment Portfolio to Reduce Capital Gains Tax

Ensure that your investment portfolio is still meeting your requirements and expectations. You may consider reworking and re-balancing your asset allocation, as well as consider selling off any under-performing assets. Reviewing your portfolio can be useful in certain scenarios, however assessable capital gains may arise in some instances. If you have made a capital gain, review your portfolio to work out if you have any carried forward capital losses from previous years or triggered any capital losses in the financial year to offset the capital gains, so you can decrease your overall capital gain and tax liability. If feasible, it is favourable to sell investments held for at least 12 months, as this makes you eligible for the 50% capital gains discount. If you have a low-income earning spouse, you may also give thought to whose name the investment or savings account is in, but it is best to seek tax advice on this.

  1. Bring Forward Your Expenses, Reduce Your Taxable Income

A potential strategy to save at tax time is to bring forward next financial year’s expenses that are tax deductible to this financial year and to possibly delay some income to the next financial year. For example, you might also want to look at the idea of paying a year’s worth of income protection premiums or pre-paying margin loan interest in one hit before the end of this financial year, as opposed to regular instalments next financial year. Pre-paying yearly professional memberships or subscriptions related to work are another way to take advantage of tax savings.

  1. Review Your Insurance

Insurance should be updated annually to reflect life changes, like having a baby, buying a new home, investing in property, getting married, getting divorced, buying, or selling a business or retiring. Also consider if you and your family have adequate life insurance protection should you suffer an extended illness, accident, disability or worse? Your home and health insurance will also benefit from a yearly review. If you have made substantial purchases this year like a new laptop or mobile, remember to add them your home and contents insurance.

  1. Maximize the Benefits of Your Superannuation 

Rules around superannuation and SMSFs can be complicated, but if navigated strategically you can boost your retirement savings quite substantially over time. Here are 5 strategies that may help. Your financial adviser can advise on which strategies best apply to you.

  • Add to your super – and claim a tax deduction If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for this financial year – and potentially pay less tax. And at the same time, you will be boosting your super balance.
  • Get more from your salary or a bonus If you or your spouse draws a salary from your business, you can direct some of your pre-tax salary or a bonus into your super as a ‘salary sacrifice’ contribution. Again, you will potentially pay less tax on this money than if you received it as take-home pay – generally 15% for those earning under $250,000 pa, compared with up to 47% (including Medicare Levy).
  • Convert your savings into super savings Another way to invest more in your super is with some of your after-tax income or savings, by making a personal non-concessional contribution. Although these contributions do not reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that’s paid in super on investment earnings. This tax rate may be lower than what you would pay if you held the money in other investments outside super.
  • Get a super top-up from the Government If you earn less than $53,838 in the 2020/21 financial year, and at least 10% is from your job or a business, you may want to consider making an after-tax super contribution. If you do, the Government may make a ‘co-contribution’ of up to $500 into your super account.
  • Boost your spouse’s super and reduce your tax If your spouse is not working or earns a low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost, and you may qualify for a tax offset of up to $540.
  1. Automate Everything

Automate your bill payments, your savings, and your investments. Automation saves time and it increases money discipline. Setting up a direct transfer into a savings or investment account each month, before it hits your everyday trading account, is one of the best habits you can adopt for long term wealth generation.

  1. Goal Set for the Year Ahead

Any savvy savings made in the next couple of months can either kick-start or top-up your investment pool ready for a turbo-charged 2022.

Take a pause and think about what you could have done differently last financial year to deliver better results. What do you want to achieve this year and what will it take to follow through and make these goals happen?

Set a specific, lofty goal for what you want to accomplish with your wealth. Why lofty? Setting a goal that may be difficult to reach encourages you to put more effort into reaching that goal. It gets your brain asking questions on how to accomplish that goal. Even if you don’t attain the goal completely, you are all but guaranteed to still come closer than you would have if you set a lower goal. Also write down WHY you want to achieve it. What will reaching your goal mean for you and your family? How do you want to feel?

“If you do not see great riches in your imagination, you will never see them in your bank balance.” —Napoleon Hill

Once you have your big vision sorted, work it backwards and break it down into much smaller achievable milestones. That might be paying off your most damaging debt (usually a credit card) as soon as possible, cutting out things from your life that do not work, or you don’t need, or finding $500-$1,000 a month to make regular contributions to your investments.

Ask our adviser to model up the outcomes using your new plans over 1 year, 5 years and 10 years. It is a fantastic motivator to see how the number at the bottom of a spreadsheet grows with small, consistent contributions to your wealth plan over time.

Most importantly – ACT. And get that wealth generation momentum humming.

If you need a hand, do not hesitate to contact our financial advisor Dean Holmes at S&W Wealth.

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THIS NEWSLETTER HAS BEEN PRODUCED BY STANLEY & WILLIAMSON AS A SERVICE TO ITS CLIENTS AND ASSOCIATES. THE INFORMATION CONTAINED IN THE NEWSLETTER IS OF GENERAL COMMENT ONLY AND IS NOT INTENDED TO BE ADVICE ON ANY PARTICULAR MATTER. BEFORE ACTING ON ANY AREAS CONTAINED IN THIS NEWSLETTER, IT IS IMPERATIVE YOU SEEK SPECIFIC ADVICE RELATING TO YOUR PARTICULAR CIRCUMSTANCES.  LIABILITY LIMITED BY A SCHEME APPROVED UNDER PROFESSIONAL STANDARDS LEGISLATION.