This year is already racing by. But before we get to the end of another financial year, take some time to think about how well you have looked after your superannuation savings this year. Australians have saved over $1.5 trillion in superannuation. That’s a lot of zeros. So how much belongs to you and are you saving enough to pay for a comfortable retirement? It is not too late to take advantage of some opportunities for tax concessions in this financial year. So what could you do?
If you have income less than $48,516…Make a personal contribution up to $1,000 into your super account and receive up to 50% bonus (eligibility rules apply) = Co-contributions
If you are an employee…Speak to payroll about putting some of your pre-tax salary into super to reduce your tax bill = Extra Employer Contributions
If your spouse has income less than $13,800…Make a contribution to his/her account to reduce your tax bill and build his/her savings = Spouse Contributions
How good is this! If you put $1,000 into your super fund, the government may also add up to $500 as a co-contribution. This is a simple way to increase your savings. But you need to put in the $1,000 before 1 July. Of course there are eligibility rules. If you can tick all the boxes below you will be eligible to receive a co-contribution from the government.
- Have income* less than $48,516
- Be under age 71 on 30 June
- Are you super ready for the year end?
- Make a personal contribution^ to your super
- Be a permanent resident for the full year
- Lodge an income tax return
- Earn at least 10% of your income* from working*
*Income is generally defined as the sum of assessable income plus fringe benefits paid by your employer and recorded on your PAYG summary plus extra amounts that your employer pays to super above the 9.25% super guarantee. ^Amounts you salary sacrifice through your employer do not count. You need to make personal after-tax contributions.
If you ticked all the boxes and are eligible, the government will put in 50 cents for every dollar you put into your super account up to a maximum co-contribution of $500. But some limits apply. To get the full $500 your income needs to be below $33,516. The maximum co-contribution is reduced by 0.03333 cents for every dollar that your income is over $33,516 and nothing is payable once your income reaches $48,516.
Extra employer contributions
Generally your employer will add 9.25% of your salary into your super account (this may increase to 9.5% next year). Many employers will agree to add more if you ask them to reduce the cash salary you receive and pay the extra as an additional employer contribution to your super account – this is called salary sacrifice. This has the benefit of reducing the tax you pay so that you can add more money to your savings and help your super grow faster.
If you are under age 60 check that your employer does not contribute more than $25,000 to your super (including the amounts you salary sacrifice) this year or you will pay penalty tax. If you are age 60 or over, you can get a bit more in with a limit of $35,000 for this year. Sometimes other amounts count towards these limits, so always get tax or financial planning advice.
If your spouse does not work full-time and has not had the opportunity to accumulate much in super, you have an opportunity to boost his/her super by making contributions and you could save some tax as well. If your spouse’s income is less than $10,800 you can claim an 18% tax offset on the first $3,000 of contributions that you make to his/her account. A smaller offset is available if your spouse’s income is over $10,800 and no offset is allowed once his/her income reaches $13,800.
Seven other tax planning tips before 30 June
1. If you are on higher levels of income private health insurance may be needed to avoid paying the Medicare Levy Surcharge. You may not be able to avoid liability for this year but taking out appropriate cover before 1 July may ensure you don’t pay it next year.
2. Prepay any deductible expenses to increase your tax deductions and reduce tax payable this year.
3. If you sold an asset that realised a capital gain look at your other assets to see if any can be sold (if appropriate) to create a loss to offset the gain.
4. If you are self employed or retired consider if you could benefit from making a personal contribution to super and claiming a tax deduction to offset taxable income or capital gains.
5. Think about setting up salary sacrifice to super before 1 July so that you can gain the full advantage next year.
6. Find your receipts for medical expenses and claim them on your tax return if your eligible out-of-pocket expenses are over your threshold to qualify for net medical expense tax offset but only if you were able to claim the offset last year.
7. If you have an account-based pension, make sure you have taken the minimum income payment otherwise you will pay tax on earnings in the fund.
For more information, give us a call on (02) 9908 9888.