Opportunities to save tax with super

Claude Collica
May 15, 2019
Personal
3
minute read

Contributing to super and claiming a tax deduction

With changes to super contribution cap rules over the past year, it’s easy to forget that there is one way the Government has made it easier to save tax and get money into super.

Before July 2017, only people who were self-employed could contribute money to super and get a tax deduction.

The only way for employed people to do this was to salary sacrifice and get their employer to divert part of their pay to their super before it had been taxed. The problem with this is that you may decide after the fact that you would like to contribute to super, but the opportunity to salary sacrifice is long gone.

Here’s the very good news.

Since 1 July 2017, people under the age of 75 are now eligible to contribute money from their bank account to their super and claim a tax deduction for it (if certain conditions are met).

This is especially useful for people who are on higher marginal tax rates or their employer refuses to set up a salary sacrifice arrangement.

The people who would benefit the most are those who earn above $37,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax 15%. That’s a big tax saving.

Things to remember

  • There is still a $25,000 concessional contribution cap, which includes any guaranteed contributions your employer puts in and any salary sacrificing you do.
  • Personal contributions are only tax deductible if you ask your super fund to treat them that way. Therefore, there is paper work to be done.
  • Anyone over 65 must meet certain conditions to contribute to super, namely the ‘work test’. The ‘work test’ involves working 40 hours in any 30-day period in the financial year in which you plan to contribute. You must be paid for that work.
  • Claiming a tax deduction for your personal contributions means there may be tax payable on the way out of your super.
  • If you get unexpected bonuses, have a high marginal tax rate, or don’t like to or can’t salary sacrifice – this strategy may be something to consider.

Important

Chat to our team for assistance with making your super contributions. The tax planning advice documented above is not financial advice. If you are interested in developing a tailored strategy for your specific set of circumstances, please call or contact us to speak to one of our experienced licensed advisors.

Article by
Claude Collica
Claude is a Certified Practising Accountant with over 15 years' experience working with small business clients, assisting them to meet their business and personal goals.

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