HOW TO USE EXTRA CASH WISELY
Reduce existing debt: High-interest loans, including credit cards and personal loans, should be reduced as a matter of priority. You might also like to think about setting up additional monthly payments to further reduce your debt and amount of interest owed. As home-loan debt is not tax-deductible, directing funds towards reducing this debt is also a fiscally sensible move.
High-interest savings account: Your savings requirements will differ according to your individual circumstances. Perhaps you want the peace of mind of knowing you have an emergency pool of funds should something unexpected occur. Perhaps you want to save for a well-earned holiday with your family. Whatever your goals, identifying and opening a separate bank account that earns higher interest rates is an excellent way to quietly grow your extra cash.
Contribute to super: Additional superannuation contributions can be a highly tax-effective option. It is important to note that, due to the Government’s most recent round of superannuation changes, the concessional contribution cap will be lowered to $25,000 for all taxpayers from 1 July 2017. This financial year, 2016-17, is the last year in which we will have concessional contribution caps of $30,000 for people aged under 50 and $35,000 for those aged above 50. In addition, between now and 30 June 2017, you can make a non-concessional super contribution of $540,000 providing you are under age 65. From 1 July 2017, an annual non-concessional cap of $100,000 and 3-year bring-forward limit of $300,000 will only be available to members with super balances below $1.6 million.
Invest: Consider setting up a managed investment fund, then make regular contributions to take advantage of dollar-cost averaging.
Donate: By donating money to charity, you can take advantage of tax deduction opportunities. If you receive a lump sum (e.g. profit from the sale of property which will attract CGT), you might also like to consider the ongoing tax benefits of a generous donation to a foundation, which can then pay your nominated charities over a period of years.
Please call us on (02) 9326 2788 if you would like to discuss.