End of Financial Year Super Strategies
The end of financial year is a great opportunity for you to consider how you can grow your superannuation balance, whilst also taking advantage of the concessional tax treatment of super.
By implementing one or more of the following strategies you may be able to pay less tax while saving more for your future.
Tax Deductable Super contributions
You may be able to claim a tax deduction for your personal super contributions. Your eligibility depends on your age, sources of income and the level of salary sacrifice and other contributions (such as employer contributions) made to your super during the financial year.
To claim a deduction, you must give a notice of your intent to claim to your super fund and they must receive and acknowledge the notice in return.
It is important to note that personal deductable super contributions count towards your annual before-tax contributions cap. The current before-tax contributions tax is $25,000 per financial year. Any contributions made over this limit will attract additional tax.
Consider a once-off contribution
After-tax contributions are made from money you have already paid income tax on and that you won't be claiming a tax deduction on.
Investment earnings within you super accumulation account are concessionally taxed at up to 15%, compared to your marginal tax rate for investments held outside of super. It is important to note, however, that your marginal tax rate may be below 15%, depending on your income.
The annual limit for after-tax contributions is currently $100,000 if your total superannuation balance is below $1.6 million. However, you may be able to bring forward three years of after-tax contributions into one year, allowing you to contribute up to $300,000 in one year without incurring additional tax. To be eligible to use this bring forward rule you must not have triggered the rule in the previous two years and your super balance must be below $1.4 million at the start of the financial year.
Salary Sacrifice to top up your super
Salary sacrifice is an arrangement where part of your before-tax wage or salary is paid into your super account instead of being received as take-home pay. This could be an effective way to boost your super and save for retirement, and depending on how much you earn there may be tax advantages for you.
To get started, you need to work out how much you can afford to invest from your pay packet and speak to your employer to discuss whether they can set up a salary sacrifice arrangement for you.
Salary sacrifice contributions along with employer contributions and any personal deductible contributions all count towards your annual before-tax contributions cap of $25,000.
In the 18/19 financial year, if you are middle to low income earner, adding to your super from your after-tax income could see you entitled to a government co-contribution of up to $500.
If your total income is equal to or less than the lower threshold of $37,697 and you make personal contributions of $1,000 to your super account, you will receive the maximum co-contribution of $500.
If your total income is between the low- and middle-income thresholds ($37,698 to $52,697), your maximum entitlement will reduce progressively as your income rises.
Spouse Super Contribution Tax Offset
If your partner's assessable income is less than $40,000 in a financial year, and you decide to make super contributions on their behalf, you may be able to claim a tax offset for yourself.
The maximum tax offset available is up to $540 if your spouse receives $37,000 or less in assessable income in the 2018/19 financial year. The offset then reduces progressively until it reaches zero for spouses who earn $40,000 or more.
Downsizer Super contribution Scheme
If you are over 65 and planning on downsizing your family home (where you have owned it for 10 years or more), you may be able to contribute up to $300,000 from the sale proceeds to your super as a downsizer contribution. To learn more, visit our Downsizer Super Contribution Scheme page.
First Home Buyers
You may be able to make voluntary superannuation contributions to use towards a deposit for your first home under the First Home Super Saver Scheme (FHSSS). Voluntary contributions you make, plus associated earnings, can be accessed subject to meeting eligibility criteria. Whether using concessional or non-concessional contributions, the total amount of contributions you can withdraw is capped at $15,000 a year (or a maximum of $30,000 in total). Superannuation Guarantee contributions, as well as contributions that don't count towards or are in excess of the contribution caps, cannot be accessed under the FHSSS as part of your deposit. For more information on eligibility and conditions, visit the ATO website.
Beware of Annual Limits
As annual limits apply to the amount you can add to your super each year, it is important to consider how much you have already contributed to your account during the financial year. This way you can decide which of these strategies are viable options for you and avoid paying additional taxes for contributing over the caps.
If you wish to assess your 18/19 contributions, discuss the options available to you to reduce your tax payable and increase your retirement savings before 30 June 2019, call us on (02) 6372 1655 to make an appointment with one of our qualified financial planners.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should access your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.
Brindleys Wealth Advisors Pty Ltd is an Authorised representative of Lonsdale Financial Group. ABN 76 006 637 225. AFSL 246934.