tax strategies

End of financial year tax strategies to boost your super

We look at the superannuation tax strategies and simple checks that could boost your retirement savings this financial year.

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June 30 is approaching and for many Australian women it’s time to take advantage of a number of tax strategies to help boost your superannuation savings.

It’s also wise to use the End-Of-Financial-Year (EOFY) to catch up on some basic superannuation housekeeping such as:

  1. Log into your super account and check your balance
  2. Check what you’ve paid in fees this financial year
  3. Check your investment returns for the financial year
  4. Check your beneficiaries are up to date
  5. Check your insurances are relevant.

Now that’s been covered here are some of the tax-efficient ways that you can use the EOFY to boost your savings.

Claim a personal tax deduction

 The average Australian working woman is taxed at a much higher marginal tax rate than the 15 per cent charged on superannuation.

For this reason, where you have surplus income, and can afford to top up your super before June 30, you can make a before-tax contribution, up to the total cap of $25,000 per financial year. This means the total of your additional contribution and any employer contributions must not be more than $25,000 each year.

This is money that you will then be able to claim a tax deduction on and in doing so you could reduce your taxable income.

Note, from 1 July 2019, your concessional contribution cap may be higher than $25,000 if you’re eligible to take advantage of the “catch up” rule.

From July last year, a new measure kicked in which allows for unused concessional super contributions to be accumulated over five years, provided the individual’s total super balance is less than $500,000.

The annual limit on concessional contributions is $25,000, individuals can make use of up to five years of previously unused contributions.

This measure could help women returning to the workforce after career breaks to have children, giving them the ability to “catch-up” on super by making higher concessional contributions without breaching the annual cap.

SUPER SPLITTING

This is a great tool that allows couples to top-up a spouses’ super balance, and is particularly relevant for women whose retirement savings has suffered due to career breaks.

This can be done at any age, but the spouse must be either below preservation age, or aged between preservation age and 65 years and still working.

A person can only split their concessional contributions with their spouse.

These generally include employer contributions, including salary sacrifice, and personal contributions for which they claimed a tax deduction.

The amount available to be split is 85 per cent of these concessional contributions (after allowing for 15 per cent contributions tax).

The concessional contributions cap still applies to the spouse receiving the split contributions. Again, this is currently at a maximum of $25,000 per financial year.

SPOUSE CONTRIBUTIONS

This strategy is slightly different to the above mentioned super splitting, in that it allows a person, typically the main breadwinner in a relationship, to increase the super balance of a non-working or low-income earning spouse, earning less than $40,000 per year.

A person is able to make non-concessional contributions (after-tax contributions) of up to $3,000 to their spouses’ account, and then also claim an 18 per cent tax offset, the maximum of which is $540, in their personal tax return.

 

This Financy article was first provided to AMP Financial Planning and has been republished here with permission.

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