How super contributions could minimise your tax
2 April 2019
In the lead-up to 30 June 2019, we want you to be aware of opportunities to save tax with super contributions.
This is tax planning advice, not financial advice, so if you are interested in this strategy, please contact our office to speak with one of our licensed financial advisors before you do anything.
CONTRIBUTING TO SUPER AND CLAIMING A TAX DEDUCTION
With changes to super contribution cap rules over the past year, it’s easy to forget that there is one way the Government has made it easier to save tax and get money into super.
Before July 2017, only people who were self-employed could contribute money to super and get a tax deduction.
The only way for employed people to do this was to salary sacrifice and get their employer to divert part of their pay to their super before it had been taxed. The problem with this is that you may decide after the fact that you would like to contribute to super, but the opportunity to salary sacrifice is long gone.
Here’s the very good news! Since 1 July 2017, people under the age of 75 are now eligible to contribute money from their bank account to their super and claim a tax deduction for it (if certain conditions are met).
This is especially useful for people who are on higher marginal tax rates or their employer refuses to set up a salary sacrifice arrangement.
The people who would benefit the most are those who earn above $37,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax 15%. That’s a big tax saving!
Things to remember:
- There is still a $25,000 concessional contribution cap, which includes any guaranteed contributions your employer puts in and any salary sacrificing you do.
- Personal contributions are only tax deductible if you ask your super fund to treat them that way. Therefore, there is paperwork to be done. Our licensed financial advisors can help you with this.
- Anyone over 65 must meet certain conditions to contribute to super, namely the ‘work test’. The ‘work test’ involves working 40 hours in any 30-day period in the financial year in which you plan to contribute. You must be paid for that work.
- Claiming a tax deduction for your personal contributions means there may be tax payable on the way out of your super.
If you get unexpected bonuses, have a high marginal tax rate, or don’t like to or can’t salary sacrifice – this strategy may be something to consider!
Please contact us ASAP for assistance with making your super contributions. There are a few things we need to check for you to ensure you don’t exceed your super caps, plus the timing of your contributions is crucial to get right to entitle you to a tax deduction for them in the 2019 year.
Contact us today! The sooner we get started, the sooner we can help you save tax – well before 30 June for sufficient time to implement tax saving strategies.
Imagine what you could do with your tax saved!
- Reduce your home loan
- Top up your Super
- Have a holiday
- Deposit for an Investment Property
- Pay for your children’s education
- Upgrade your Car
Contact the team at Shakespeare on 9321 2111 to discuss how this may apply to your individual circumstances.
General disclaimer: Our firm provides the information on this website for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles on this website are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose