In the lead-up to 30 June 2019, we want you to be aware of opportunities to save tax with super contributions.
If you are interested in this strategy, please contact our office to speak with us before you do anything (this is very important).
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%. Hence every dollar above $37,000 of gross income (without breaching the $25,000 concessional contribution cap) that’s contributed to superannuation and claimed as a tax deduction effectively reduces your tax down to 19.5% (34.5% less 15% contribution tax).
Things To Remember:
- There is still a $25,000 concessional contribution cap, which includes any employer super guarantee (sg) contributions and any salary sacrificing into superannuation you may have made.
- Personal contributions are only tax deductible if you ask your super fund to treat them that way. Therefore, there is paperwork to be done. We 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.
Something To Keep In Mind For 2019 / 2020 Tax Planning
A change to concessional contribution rules means, from the 2019 / 2020 year onwards, if you haven’t used received your entire concessional contribution cap amount by 30 June of the previous year, any unused amount can be carried-forward and contributed as an additional concessional contribution in the 2019/20FY. Note – the unused amount can be carried-forward for up to 5 (financial) years starting in 2019/20fy before expiring. In other words…use it or lose it!
Important! 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.
