Boost your super before 30 June
June 30 is almost upon us, but it’s not too late to tuck a bit extra into your superannuation fund to help minimise your 2013/14 tax bill and to beef up retirement savings for later.
If you work for someone else, Ron Hodge, CEO of investment supermarket, InvestSMART, recommends talking to your employer about sacrificing some of your salary or year-end bonus before 30 June into superannuation.
“This is commonly known as salary sacrificing, and this strategy involves agreeing with your employer for some of your pre-tax salary or bonus to be paid directly to your super fund, before income tax is deducted,” says Hodge.
Just be aware that the government has imposed concessional caps to restrict how much pre-tax salary a worker can shift into superannuation. For the 2013-14 financial year this cap has been set at $35,000 for those over the age of 60 – its $25,000 for those younger than 601. Remember this cap includes the super guarantee paid by your employer.
Other ways to top up super is to make an ‘after-tax’ super contribution (also called ‘non-concessional’ contributions). Once again there are caps on the amount of non-concessional contributions you can make each year before you pay extra tax – although at $150,000 most of us probably won’t need to bother negotiating the cap. It’s also worth noting that the non-concessional contributions cap will increase to $180,000 for the 2014/15 tax year.
Another strategy worth considering is making an after-tax contribution on behalf of your spouse to receive a tax offset. To receive the maximum tax offset of $540 you’ll need to make an after-tax contribution of $3,000 into your spouse’s super account, while your spouse’s assessable income (including potential fringe benefits and salary sacrifice contributions) must be less than $10,800 a year – although there’s the possibility of a partial tax offset until your spouse’s assessable income exceeds $13,800.
Hodge warns that some superannuation strategies might not suit your financial or taxation situation and that it’s always best to consult with a qualified accountant before making a move.
1 https://www.ato.gov.au/individuals/super/in-detail/employer-contributions-and-salary-sacrifice/salary-sacrificing-super/?page=3
Frequently Asked Questions about this Article…
You can boost your superannuation by salary sacrificing some of your pre-tax salary or year-end bonus into your super fund before June 30. This helps minimize your tax bill and increase your retirement savings.
Salary sacrificing involves agreeing with your employer to pay some of your pre-tax salary or bonus directly into your super fund before income tax is deducted. This can help reduce your taxable income and increase your super savings.
For the 2013-14 financial year, the concessional cap is $35,000 for those over 60 and $25,000 for those younger than 60. This cap includes the super guarantee paid by your employer.
Yes, you can make after-tax (non-concessional) contributions to your super. The cap for these contributions is $150,000 for the 2013-14 tax year, increasing to $180,000 for the 2014-15 tax year.
You can receive a tax offset by making an after-tax contribution of $3,000 to your spouse's super account. To get the maximum offset of $540, your spouse's assessable income must be less than $10,800, with a partial offset available until their income exceeds $13,800.
Consulting a qualified accountant is important because superannuation strategies may not suit everyone's financial or taxation situation. An accountant can provide personalized advice to ensure you make the best decision.
Making non-concessional contributions can help you increase your super savings without affecting your taxable income, as these contributions are made from after-tax income.
Before making super contributions, consider the concessional and non-concessional caps, your financial situation, and consult with a qualified accountant to ensure the strategy aligns with your financial goals.
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