Tax Planning Tips: Superannuation
Superannuation & SMSF
The end of the financial year is just around the corner. Did you know that you can use super to lower your tax? Here are some tips to help you do that.
Tip #1. Make voluntary super contributions up to your concessional cap
Prior to the 2017/18 financial year, you could only claim a tax deduction on voluntary personal super contributions if you were self-employed.
However, from 1 July 2017, this restriction has been removed, allowing both employees and self-employed people to potentially claim tax deductions for the voluntary super contributions they make. Once in your fund, these contributions are taxed at a concessional rate of 15% (provided your taxable income is under $250,000). If it is more than $250,000, your contributions will be taxed at 30%.
It’s important to be aware that there is cap on the amount of concessional contributions that you can make. This cap is $25,000. Your concessional contributions include any contributions made by your employer on your behalf (such as the 9.5% compulsory Superannuation Guarantee).
Example: Imagine that your taxable income is $110,000 per year and that your employer has contributed $10,500 to your super through the compulsory super guarantee. You’ll still have up to $14,500 you can contribute as a voluntary super contribution without exceeding your annual concessional contribution cap (i.e. $25,000 less $10,500). If you contribute $14,500 voluntarily into your super fund, this amount will be taxed at 15% in your super fund, rather than at your marginal tax rate of 37%, saving you $3,190 in tax.
Tip #2. Take advantage of the First Home Super Saver Scheme (FHSS) if you’re eligible
The FHSS is an attempt by the government to ease the pressure on housing affordability. First home buyers can voluntarily make pre-tax contributions up to $15,000 to their super fund in any one financial year (up to a maximum of $30,000) to help them save for their deposit. The benefit is that super funds are taxed at 15%, which is lower than Australia’s lowest marginal tax rate.
Tip #3. Delay withdrawing your super if you’re aged between 55 and 60
If you’ve retired but are between the ages of 55 and 60, there are tax benefits if you delay withdrawing your super until you turn 60. That’s because there is usually a taxable component of your super and if you access these funds prior to turning 60, you will generally be taxed as follows:
15% plus Medicare levy for lump sum taxable components over $205,000 at your marginal tax rate, less a 15% pension offset if you’re accessing the taxable component of your super pension.
How we can help
At Create and Protect Financial Planning, we can help you to plan your affairs tax-effectively and boost your super at the same time. We’ll take the time to understand your needs and goals so we can provide you with the best possible advice.
Call 1300 707 955 or email firstname.lastname@example.org to find out how we can help you!