NEWS + VIEWS – 23/05/2025
MARKETS
The US share market saw its worst day in a month on Wednesday on concerns over the country’s swelling debt and deficits, with Moody’s lowering the government’s credit score below the AAA level. The full effects of the US tariffs are yet to be seen on US economic data. Company earnings growth has dropped from an expected 12% to 7%. US share markets appear to be discounting the data, while bond markets have pushed up yields as credit ratings were downgraded.
April economic data for the U.S. points to higher inflation expectations, slightly higher import prices and moderate weakness in spending and goods production. The full impact of tariffs remains to be seen, but so far, lower oil prices appear to be holding down imported inflation and providing a shock absorber for consumer purchasing power. Interestingly, investors are responding to these developments in a mixed fashion, with equity investors seemingly upbeat, focusing on the hard data, rather than noisy, soft, or survey data.
SELL IN MAY AND GO AWAY?
It’s that time of year when the saying, ‘sell in May and go away’ crops up. The chart below shows the ASX 200 performance in May over the past 25 years. On average it is down 0.63%, which doesn’t sound much but the falls in the down years for May can be quite hefty.
Source: Coppo Report
The Coppo Report pointed out that the weakness usually starts around mid-May. Often that extends into June, which is also a down month on average. September is the other month that is negative on average.
The reasons touted for the May selling include:
Fund managers selling to lock in June 30 bonuses.
Switching of portfolio managers and the ‘receiving’ manager preferring to start with a clean slate (or cash).
Major banks going ex-dividend (i.e. NAB, ANZ and Westpac). The share price usually falls at least by the amount of the dividend.
‘Dividend chasers’ selling out of the banks that have gone ex-dividend and buying other dividend payers.
So far, so good this year.
END OF FINANCIAL YEAR TASKS
The end of the financial year is nearly here so below is our annual reminder of tasks that might need your attention before the 30th of June.
SUPERANNUATION
Minimum pension
Your accountant can advise of your minimum pension for those with a Self-Managed Super Fund (SMSF).
Concessional contributions
The maximum amount for concessional contributions for 2024/25 is $30,000. There is a tax deduction for these contributions although they are taxed at 15% in your Super Fund. They may be attractive for those earning over $45,000 p.a. and even more so for those earning over $135,000.
A work test needs to be met (40 hours in a 30-day period) between 67 and 74 years of age to make personal contributions (i.e. not mandatory employer or salary sacrifice contributions).
Carry forward unused concessional contributions
Those with a super balance of less than $500,000 may be able to use carry forward unused concessional contributions from the previous five years. This may be worthwhile if you have sufficient taxable income to utilise the tax deduction.
Non-concessional contributions
Those under 75 years of age with a total super balance of less than $1.9 million as at 30 June 2024 can make non-concessional contributions to super of $120,000 p.a. Unlike concessional contributions, there is no tax deduction for these contributions.
Bring forward rule
There is the bring forward provision until the age of 75, which allows utilising up to two future years to a total of $360,000 in one year. Note that to maximise contributions, you may consider a $120,000 contribution before 30 June 2025 and then $360,000 in the next financial year.
If your total superannuation balance is more than $1.66 million, you may not be able to take advantage of the full $360,000 bring forward rule as it would take your super balance above the maximum $1.9 million transfer balance cap.
With the changing caps, contributions are becoming more complex, so it is important to get advice before making contributions.
Government super co-contribution
If your income is less than $60,400 in the 2024/25 financial year and at least 10% of your total income is from employment (not investment) activities, you may receive a government super co-contribution of up to $500. The co-contribution is 50% of personal non-concessional contributions although it scales down for income above $45,400.
Spouse contribution tax offset
Making an after tax (non-concessional) contribution to your spouse’s super where they are earning less than $40,000 may attract a tax offset to your taxable income. The full $540 offset is available where total spouse annual income is less than $37,000 and phases out at $40,000.
Downsizer contributions
If you are over 55 years of age, you may contribute up to $300,000 from the proceeds of the sale of your home to super. Each spouse can contribute, and the contributions don’t impact other caps.
You must have lived in the home for more than ten years and thus be exempt or partially exempt from capital gains tax. The contribution must be made within 90 days of receiving the sale proceeds and the appropriate form lodged by that time.
PERSONAL
Prepay investment related interest
If you have investment loans, it may be worthwhile considering paying the interest in this financial year.
Home office expenses
Gather receipts for expenses relating to your home office and travel. Consider bringing forward near term purchases.
Donations
Locate receipts for donations made over the course of the year. Possibly ‘bring forward’ proposed donations.
Review who owns assets
It is often tax advantageous to hold assets in a lower income earning spouse’s name. This may assist in optimising your tax situation in future years.
Realise capital gains/losses
Consider deferring the sale of assets to crystallise a capital gain in the next year (and defer tax on the gain). If gains have been made, then consider selling assets that would create a capital loss. This is usually not relevant to those in pension phase in super but may relate to a SMSF where monies are in accumulation phase.
Keep in mind the risk of receiving a lower sale price by deferring or bringing forward the sale of assets.
Also note that the capital gain/loss is generally crystallised when a sale contract is entered into, not when sale proceeds are received.
DISCRETIONARY TRUSTS
Given the Tax Office’s focus on trusts, one of the key end-of-year tasks is the annual trust distribution minutes.
The trustees of a discretionary trust must complete these minutes before 30 June each year. A failure to do so may mean income is taxed at the highest tax rate.
DIVISION 296 – TAXING UNREALISED GAINS
It looks like the Division 296 proposed tax on super balances over $3 million will be passed, although the final form may still be negotiated. We will cover this in the next edition of the News and Views.
Gerard O’Shaughnessy
P 0423 771 330
Important Disclaimer
The directors, employees and authorized representatives of PPN Wealth do not guarantee the information in this report to be complete, up to date, accurate nor applicable to your personal circumstances. This is general investment advice only. You should not act on recommendations in this report without discussing proposed actions with your PPN Wealth adviser to ensure recommendations are suitable to your circumstances.
The principals, associates and employees of PPN Wealth may have investments in the securities or companies, referred to in this report.
This report may not be distributed in any way without the prior permission PPN Wealth. The directors, employees and authorized representatives of PPN Wealth do not accept any liability for third parties’ actions relating to this report.
