Super and tax rules are always changing – providing fresh opportunities to help maximise your retirement savings. Here are two new ways you may be able to help boost your super, as well as your tax return.
Good news for employees
Before 1 July 2017, you could only claim a tax deduction for making an after-tax contribution to your super if you earned less than 10% of your income from salary and wages. But now employees can enjoy a potential tax deduction too.
By making an after-tax contribution into your super, you could help boost your retirement nest-egg – and by claiming a tax deduction you could reduce your taxable income.
The super contribution is generally taxed at 15%, not your marginal tax rate, which could be up to 47% (including the Medicare levy). Higher income earners will pay an additional 15% tax on concessional contributions within the cap.
This strategy could suit you if your employer doesn’t allow you to salary sacrifice – or if you’d rather not salary sacrifice because it reduces other employee entitlements, such as Super Guarantee contributions. And even if you are salary sacrificing, you might also want to consider using this strategy if you’re keen to contribute the full amount of concessional contributions – which this 2017/18 financial year is capped at $25,000.
 Penalties may apply if you exceed the cap.
Help your spouse – and yourself
Does your spouse earn under $40,000 each year? If so, their super could probably benefit from an extra top up. And now, if you contribute to their super you could potentially receive a tax offset of up to $540. Before 1 July 2017, this tax offset was only available to couples where your spouse earned $13,800 per annum or less. But with the threshold increased to $40,000, more people will be able to help increase their spouse’s retirement savings while potentially improving their own tax position.
What you need to consider
Investing more in your (or your spouse’s) super now is so much more than a tax-effective strategy. By contributing more while you’re working, you’re helping to maximise your nest egg for the time when you (or your spouse) are retired and no longer receiving a regular income from a job or business. But before you decide to make extra super contributions, there are a few things to consider.
Remember, once you’ve put any money into your (or your spouse’s) 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. What’s more, from 1 July 2017, the Government reduced the concessional contribution cap to $25,000 for everyone – which includes the Super Guarantee that your employer pays into your super. If you go over this amount, you could get penalised – so it’s important to keep this in mind.
Finally, to get the tax-deduction or offset this year, be sure that your super contribution makes it into your super account before 30 June 2018. That’s because the contribution is considered made on the date that it reaches your super fund – not on the day you transfer it from your bank account. So if it hits your super account after 30 June 2018, it won’t be counted for this financial year.
You will need to meet certain eligibility criteria to benefit from these strategies. There are also other strategies you can consider to help you have the retirement lifestyle you want. We can help you decide which strategies are appropriate for you. To find out more, talk to us today.
Important information and disclaimer
This publication has been prepared by Mark McNeany and Chris Steiger of Vertex Group Pty Ltd, Authorised Representatives of GWM Adviser Services Limited (ABN 96 002 071 749) (“Licensee”), trading as Garvan Financial Planning, an Australian Financial Services Licensee, registered office at 105–153 Miller St North Sydney NSW 2060, and a member of the National Australia Bank Limited group of companies (“NAB Group”) .
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 1 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.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.