Smart super strategies for this EOFY

Want to help boost your retirement savings while potentially saving on tax? Here are five smart super strategies to consider before the end of the financial year.

1.   Add to your super – and claim a tax deduction

This financial year, there are new rules about who can claim a deduction for personal (after tax) contributions to super.

In the past, you could only claim the deduction if you earned less than 10% of your income from employment. But from 1 July 2017, deductions for personal contributions can also be claimed by employees.

How it works

If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for this financial year – and potentially pay less tax. And at the same time, you’ll be boosting your super balance.

The contribution is generally taxed at up to 15% in the fund (or up to 30% if a higher income earner). Depending on your circumstances, this is potentially a lower rate than your marginal tax rate, which could be up to 47% (including the Medicare Levy) – which could save you up to 32%.

Once you’ve made the contribution to your super, you need to send a valid ‘Notice of Intent’ to your super fund, and receive an acknowledgement from them, before you complete your tax return, start a pension, or withdraw or rollover the money.

Keep in mind that personal deductible contributions count towards the concessional contribution cap, which is $25,000 for this 2017/18 financial year (which also includes all employer contributions, including Superannuation Guarantee and salary sacrifice). Penalties may apply if you exceed the cap – so it’s important that you stay within the limits.

2.   Get more from your salary or a bonus

If you’re an employee, you may be able to arrange for your employer to direct some of your pre-tax salary or a bonus into your super as a ‘salary sacrifice’ contribution.

Again, you’ll potentially pay less tax on this money than if you received it as take-home pay – generally 15% for those earning under $250,000 pa, compared with up to 47% (including Medicare Levy).

How it works

Ask your employer if they offer salary sacrifice. If they do, it can be a great way to help grow your super tax-effectively. Remember salary sacrifice contributions count towards your concessional contribution cap, along with any superannuation guarantee contributions from your employer and personal deductible contributions.

3.   Convert your savings into super savings

Another way to invest more in your super is with some of your after-tax income or savings, by making a personal non-concessional contribution.

Although these contributions don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that’s paid in super on investment earnings. This tax rate may be lower than what you’d pay if you held the money in other investments outside super.

How it works

Before you consider this strategy, make sure you’ll stay under the non-concessional contribution cap, which in 2018 is $100,000 – or up to $300,000 if you meet certain conditions. That’s because after-tax contributions count as non-concessional contributions – and penalties apply if you exceed the cap.

Also, to use this strategy, your total super balance must have been under $1.6 million on 30 June 2017.

Remember, once you’ve put any money into your super fund, you won’t be able to access it until you reach preservation age or meet other ‘conditions of release’. For more information, visit the ATO website at ato.gov.au.

4.   Get a super top-up from the Government

If you earn less than $51,813 in the 2017/18 financial year, and at least 10% is from your job or a business, you may want to consider making an after-tax super contribution. If you do, the Government may make a co-contribution of up to $500 into your super account.

How it works

The maximum co-contribution is available if you contribute $1,000 and earn $36,813 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $36,814 and $51,812 pa.

Be aware that earnings include assessable income, reportable fringe benefits and reportable employer super contributions. Other conditions also apply – speak to your financial planner to find out more.

5.   Boost your spouse’s super and reduce your tax

If your spouse is not working or earnsa low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost, and you may qualify for a tax offset of up to $540.

How it works

The income thresholds increased on 1 July 2017. So now, you may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer super contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,001 and $39,999 pa.

You’ll need to meet certain eligibility conditions before benefitting from any of these strategies.

WANT MORE INFORMATION?

If you’re thinking about investing more in super before 30 June,, we can help you decide whether making a personal deductible contribution is right for you. We can also help you assess all your options and consider other strategies are appropriate for you that may help build a healthy retirement nest-egg.

For more information, please contact Fionne McKillop at McKillop Financial Planning on (02) 9542 2904 or email fionne@mckillopfp.com.au

Disclaimer

Content contained within this site and any related sites including, but not limited to, our Facebook page, Twitter profile and any LinkedIn profiles of our financial planners is general information only and is not advice, financial planning, legal or otherwise.

This article was prepared by Integrated Planning Systems Pty Limited ABN 21 051 429 184 trading as McKillop Financial Planning, an Authorised Representative of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, Australian Financial Services Licensee, 105 – 153 Miller St, North Sydney NSW 2060, a member of the National Australia Bank Group of companies. The information is current as at 12 April 2018.

The article does not take into account your personal objectives, financial situation or needs. Accordingly, you should consider how appropriate the information is to you with regard to your personal circumstances. You may wish to obtain an adviser’s assistance, tax and/or legal advice to make this assessment. Before buying any financial product, you should read the Product Disclosure Statement (PDS) for that product and consider the contents of the PDS before making a decision about whether to acquire the product.Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility of errors or omissions for this document.

Important information

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.

Information in this publication is accurate as at the date of writing (March 2018). In some cases the information has been provided to us by third parties. While it is believed the information in this publication is accurate and reliable, the accuracy of that information is not guaranteed in any way.

Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, or accept any responsibility for errors or omissions in this document.

If any financial products are referred to in this publication, you should consider the relevant Product Disclosure Statement or other disclosure material before making an investment decision in relation to that financial product. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.

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