Did you know you can boost your Superannuation and cut your Tax bill?

One of the great things about superannuation is that you generally pay less tax, both on the money that goes in, and on the earnings your money makes.  Even small amounts add up over time, and voluntary contributions can reduce the amount of tax you pay. If you’re on a low income, you may be eligible for extra contributions from the government.

There’s a number of contributions you might be able to consider, depending on your personal circumstances, and they might also help you to manage your tax. Here are a few pointers to consider pre 30 June.

If you are going to consider these remember most Funds have a cut-off date before the 30th so if you want to make sure you get the deduction check with the Fund when the last day, they will be accepting contributions

Pre-tax super contributions:

These payments, called concessional contributions are tax deductible to you and are taxed at 15% in the Fund. For most people, this will be lower than their marginal tax rate. You benefit because you pay less tax while you boost your retirement savings.

Generally, making extra concessional contributions is tax effective if you earn more than $37,000 per year. There’s a limit to how much extra you can contribute. The combined total of your employer and personal contributions must not be more than $25,000 per financial year.

As an example, if you or your employer have contributed $10,000 up to June you can make an additional contribution of $15,000 to bring the total deductible to $25,000. Again, you need to ensure your Fund can receive and acknowledge this before 30 June to get the tax deduction

Government co-contributions

If you earn less than $53,564 per year (before tax) and make after-tax super contributions, you may be eligible for a matching contribution from the government, called a co-contribution. The government will work out how much you are entitled to when you lodge your tax return. If you’re eligible, the government can contribute up to $500 to your super account in a year. Depending on your income, the government will pay in up to 50 cents for every one dollar you contribute yourself from your after-tax income.

Spouse contributions

Making non-concessional contributions to your spouse’s super fund can be an effective strategy to reduce the amount of tax you will pay on that income in retirement. This strategy can also assist in equalising the level of retirement income that you and your spouse can receive.

Under the current 2019/2020 tax rules, you may be able to claim an 18% tax offset on super contributions up to $3,000 that you make on behalf of your non-working or low-income-earning partner. You can contribute more than $3,000, but you won’t receive the spouse contribution tax offset on anything above $3,000.

Early Release of Super

If you have taken an Early release of your Super under the Government Assistance measures, then you should check with your advisers whether you are able to make any additional contributions. The Government has indicated this was not the intention of the Assistance Package.