Super is often the long forgotten relative in the investing world.
At it’s core, superannuation is money put aside by your employer or you, during your working life for you to live on when you retire from work.
Super in itself isn’t an investment, but a tax effective investment structure where generally funds are taxed at 15% versus your marginal tax rate outside of super.
TAX DEDUCTIBILITY
One thing you might not be aware of is that some superannuation contributions may be eligible for a tax deduction including:
- Personal super contributions: you may be eligible to claim a tax deduction for your personal contributions up to the $27,500* (2023/24) concessional contributions cap. Be aware that this cap is for ALL concessional contributions and includes employer contributions, salary sacrifice and any additional contributions made by your employer (insurance premiums etc.). You may also be eligible to make additional personal contributions from your after-tax salary up to the non-concessional contributions cap of $110,000 (2023/24). Of note, if you exceed these caps you may have to pay extra tax. Click here for more information. *Your cap may be higher if you have unused concessional contribution cap amounts.
If you have unused concessional cap amounts from previous years, you may be able to carry them forward to increase your contribution caps in later years.
You’re eligible to do this if you have both:
- a total super balance of less than $500,000 at 30 June of the previous financial year
- unused concessional contributions cap amounts from up to 5 previous years
Click here for more information.
- Government co-contributions: low or middle-income earners that make personal super contributions may receive a government co-contribution, up to a maximum $500 where your income is less than $43,445. A partial payment is available where your income is less than $58,445 (not applicable to salary sacrifice contributions which are before tax contributions). Click here and here for more information.
- Employee salary sacrifice: an agreement with your employer to give up part of your salary (thereby reducing your taxable income) and investing it into super to boost your retirement savings. Contributions are made before tax and taxed within the super fund. Click here for more information.
- Spouse contributions: a tax rebate (maximum $540) may be available for after-tax contributions to super on behalf of a low-income spouse (earning less than $40,000). Click here for more information.
- Low income tax offset: If you earn an adjusted taxable income up to $37,000 you may be eligible to receive a refund into your superannuation account of the tax paid on your eligible concessional superannuation contributions, up to a cap of $500.
WHAT YOU NEED TO BE AWARE OF
In regards to super, you should be aware that:
- In order to be allowed to claim a tax deduction for a superannuation contribution, whether as part of your compulsory super guarantee payments for employees or a voluntary contribution for yourself, the payment must be received and processed by the superannuation fund by 30 June each year. Check with your superannuation fund/s as to their respective cut-off dates. Automatic processing through your accounting software can take additional time so check with your account.
- If you’re aged between 67-74, you won’t need to satisfy the ‘work test’ before making non-concessional contributions (after tax) and salary sacrifice contributions (before tax) to your superannuation. However, if you want to claim a tax deduction on your personal contribution, you’ll still need to satisfy the work test requirement.
- If you want to claim deductions for your personal contributions, you need to provide a valid ‘notice of intent to claim a deduction for personal superannuation contributions’ to your super fund and have received written acknowledgement. This acknowledgment needs to be received before completion of your tax return. You can find more information here.
The information above is general in nature and is to be used for education purposes only. Before acting on any information, you should consider the appropriateness of the information provided and how this may impact your personal needs, objectives, and financial situation which have not been taken into account. It is recommended that you seek guidance from a qualified financial specialist such as a financial adviser, accountant or tax agent before implementing. An Accountant or Tax Agent can help you plan ahead and research the appropriateness for tax efficiency and to maximise the amount of money you get back.
Suzanne X
The Money Mindset Reprogram can help you transform your relationship with money. Working with a financial coach can help you to gain clarity around creating money and managing money. If you would like to explore this further, please book in for a free 15 minute chat.