Super Smart Strategies

When the end of the financial year creeps around it’s time to contemplate how you can maximise your tax return and your superannuation.

Here’s our top 5 Super Smart Strategy tips that will give you something to think about…

1. Add some of your income to your super to claim a tax deduction:

Choosing to make an after-tax income or savings contribution into your superannuation can possibly result in a tax deduction for this financial year. This means paying less tax and boosting your super balance at the same time.

How does it work?

A superannuation contribution is generally taxed at up to 15% in the fund (or up to 30% if your income from certain sources is $250,000 or more). Depending on your personal situation, this may be a lower rate than your marginal tax rate that’s up to 47% (including the Medicare Levy). Hence, there’s a possible savings of up to 32%.

After contributing to your superannuation it’s important to remember that you need a valid ‘Notice of Intent’ to your super fund, plus an acknowledgement from them to complete your tax return, start a pension, or withdraw or rollover the money.

Remember! Personal deductible contributions count towards your concessional contribution cap, which is $27,500 for the 2022/23 financial year. Penalties do apply if you go over this with the exception that if you didn’t use your entire concessional cap in financial years since 1 July 2018, you might be eligible to make ‘catch-up’ contributions.

These concessional contributions include all employer contributions, including Superannuation Guarantee (SG) and salary sacrifice so remember to add all these into your total amounts. Other eligibility rules, such as a work test for those 67-74, may also apply so speak to us for more information.

2. Super salary sacrifice

If you are employed, you have the possibility to arrange with your employer to allocate a portion of your salary or bonus into your superannuation fund through a “salary sacrifice” contribution. This can potentially result in lower taxes compared to receiving the money as take-home pay, typically around 15% for those earning less than $250,000 per year (or up to 30% for incomes of $250,000 or more), as opposed to up to 47% including the Medicare Levy.

Here’s how it works: inquire with your employer about salary sacrifice options. If available, it can be a beneficial method to effectively increase your superannuation savings because the contributions are deducted from your pre-tax income, preventing you from spending it on other expenses.

It’s important to note that you can only salary sacrifice amounts that you have not yet earned, including both your regular salary and any expected bonuses. Additionally, keep in mind that salary sacrifice contributions count towards your concessional contribution limit, along with any superannuation guarantee (SG) contributions from your employer and personal deductible contributions. Furthermore, you might have the opportunity to make catch-up contributions if you haven’t utilized your full concessional contribution limit since July 1, 2018.

3. Put some of your savings into super savings

One more method to increase your superannuation investment is by using a portion of your income or savings after taxes, known as a personal non-concessional contribution.

Although these contributions do not reduce your taxable income for the year, they still offer the advantage of a low tax rate of up to 15% on investment earnings within the superannuation fund. This tax rate may be lower compared to what you would pay if you invested the money outside of superannuation.

Here’s how it works:

Before considering this approach, ensure that you remain within your non-concessional contribution (NCC) limit. For the 2022/23 financial year, the NCC limit is $110,000, but it can be as high as $330,000 if specific conditions are met. It’s crucial to note that after-tax contributions count towards the NCC limit, and penalties may apply if you exceed it.

Furthermore, to utilize this strategy in the 2022/23 financial year, your total super balance (TSB) must have been below $1.7 million on June 30, 2022.

4. Receive a top-up from the Government straight into your super account

If your earnings for the 2022/23 financial year are below $57,016, and at least 10% of that income comes from your job or a business, it might be worth considering making an after-tax contribution to your superannuation. By doing so, the Government could provide a ‘co-contribution’ of up to $500, which will be added to your super account.

How does it work?

The maximum co-contribution is available if you contribute $1,000 and earn $42,016 or less per year. If you contribute less than $1,000 or earn between $42,017 and $57,016 per year, you may receive a lower co-contribution amount. It’s important to note that earnings include assessable income, reportable fringe benefits, and reportable employer super contributions. Additional conditions also apply, and it would be beneficial to consult with your financial adviser for further details.

5. Boost your partner’s super to help lower your tax

If your spouse has either no income or a low income, it may be worth considering making an after-tax contribution to their superannuation account. This strategy has the potential to benefit both of you: your spouse’s super account receives a boost, and you may qualify for a tax offset of up to $540.

Tell me how

To obtain the full tax offset, you may need to contribute $3,000, and your spouse’s income should be $37,000 or less per year, including their assessable income, reportable fringe benefits, and reportable employer super contributions.

If you contribute less than $3,000 or your spouse earns between $37,000 and $40,000 per year, a lower tax offset may be available.

We hope that these Super Smart Strategies can give you something to consider leading up to the EOFY.

Please reach out to us if you need personalised advice that takes into account your current situation, finances and objectives.

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The information contained within is for education purposes only. Please seek professional advice from a licensed financial advisor.