As the end of the financial year (EOFY) approaches, many investors focus on common strategies such as topping up super, maximising deductions, prepaying interest or reviewing investment portfolios. While these are important steps, there are also less-obvious actions that can make a meaningful difference to your tax position, wealth strategy, and long-term planning outcomes.
Here are five areas that investors sometimes overlook when preparing for EOFY.
1. Capital gains in changing markets
Investment markets have experienced a period of rapid movements in equities, property and fixed income. In these changing conditions, taking a thoughtful approach to buying and selling investments can help ensure that capital gains tax (CGT) outcomes align with broader wealth and financial planning goals.
It is a good time to consider whether it is more appropriate to realise capital gains this year or defer them to a future period. The decision may depend on factors such as:
- Expected income levels this year compared to next year
- Eligibility for the 50% CGT discount
- Available capital losses
- Your investment timeframe and tolerance of risk
If you have unused capital losses, now may be a good time to consider how to use them strategically. While capital losses can’t be offset against ordinary income, they can be applied against realised capital gains. In some cases, realising strategic gains before 30 June may help “unlock” unused losses that have been carried forward.
Be aware of “wash sale” rules. Some investors may consider selling an asset to realise a loss and then quickly buy it back. This is known as a wash sale, and the ATO may disallow the loss if the transaction is viewed as being undertaken mainly for tax purposes.
2. Superannuation recontribution strategies
A super recontribution strategy is sometimes overlooked because it requires coordination between pension payments, contributions and tax components. But, when used appropriately, it may significantly reduce future taxes for beneficiaries and increase flexibility in estate planning.
This strategy usually involves withdrawing a portion of your super (usually from the tax-free and taxable components proportionally), then recontributing these funds back into super as a non-concessional contribution (if you’re eligible).
3. Bringing forward deductions and deferring income
While prepaying expenses and deferring income is a well-known EOFY strategy, it may not be successful for everyone, so check carefully that it’s useful for you.
Bringing forward deductions by prepaying expenses such as interest on investment loans, income protection premiums, ongoing advisory fees, or professional subscriptions may help manage your tax position. However, if you’re approaching income thresholds (such as Medicare Levy Surcharge minimums, private health insurance rebates or HECS/HELP repayment bands), it’s important to check whether prepayments will actually provide a net financial benefit.
Deferring income could also help manage your tax position, and small businesses using cash accounting may be able to defer invoicing until July, and investors might choose to delay receiving distributions or bonuses. Keep in mind that deferring income may affect borrowing capacity or access to government payments.
4. Managing Division 7A loans
Division 7A can catch business owners off guard at EOFY. These rules apply when a private company lends money, pays expenses or provides assets to shareholders or their associates. If not handled correctly, the ATO may treat the payment as an unfranked dividend, resulting in unexpected tax outcomes.
To stay on top of your Division 7A obligations:
- Confirm all loans are documented
- Check minimum yearly repayments
- Consider whether to repay, refinance or restructure
- Don’t forget about company-paid personal expenses
A well-timed review can help prevent unintended tax outcomes and support ongoing compliance within your structure.
5. Reviewing your records
Another often-missed EOFY task is to check that your records and supporting documentation are complete before preparing your tax return.
The ATO is increasing its use of data-matching programs, so accurate documentation is essential. This includes keeping receipts for deductible expenses and retaining statements for managed funds and other investments.
Next steps
EOFY planning involves more than topping up super or gathering receipts. Areas such as CGT and Division 7A considerations can lead to unexpected tax outcomes if overlooked, while proactive strategies such as recontribution planning can support long-term estate-planning benefits.
Taking a structured approach helps ensure your financial position is working cohesively and that valuable opportunities are not missed. Speak with your local Nexia Adviser today to navigate strategies that may help your tax outcomes and support your long-term goals.