One of the best things about superannuation is that you normally pay concessional tax on both the money you put into it and the returns it generates. Depending on your unique circumstances, you can contribute to your super in a variety of ways.
Consider reaching out to Omura Wealth Advisers, an australia superannuation advisor, we might be able to assist you with your tax preparation and other information you may need.
Superannuation payments made from your pre-tax salary, including employer Super Guarantee and salary sacrifice contributions, are normally taxed at 15%. Earnings from your super account are taxed at a maximum of 15%. Earnings on assets supporting your pension are tax-free if you get a pension through your super. Outside of super, the same investment profits may be taxed at your marginal tax rate.
Seek an Expert Superannuation Advisor
Because taxation might be complicated, you should consult with your superannuation advisor or a about your specific circumstances. If you have a larger salary, increasing your super may assist you in lowering your marginal tax rate. If you’re taking a career sabbatical or earning less than usual, it may be worthwhile to look into alternatives to assist you maintain your super contribution.
Here Are Five Methods to Donate to Your Super to Save Tax:
The government’s contribution
The amount you make and pay into your super decides whether you are eligible for a government co-contribution and, if so, how much you will get. Each year you are qualified, the maximum co-contribution is $500. Because a government co-contribution is not included in your taxable income, you do not pay tax on it when it is deposited into your super.
You can request that your company contribute a portion of your income to your 401(k). This salary sacrifice is frequently in addition to the Superannuation Guarantee minimum percentage contributions that your company is legally required to provide.
Before using this technique, check with your company to see how they handle salary contributions. Percentage of your salary is sacrificed directly into super, so it is deducted from your gross (before-tax) income. Unless you’ve exceeded the concessional contribution ceiling, this implies it’ll be taxed at 15%.
If your annual income exceeds $250,000, you may be subject to an extra 15% tax. There is a cap on how much you may contribute to your superannuation that is tax-free. The Australian Taxation Office (ATO) website has the most up-to-date information on contribution caps.
Keep in mind that, unlike the employee super guarantee, businesses are not required to provide salary sacrifice. You should check with your employer to see whether this is a possibility for you, or reach out to your superannuation advisor for more better approach.
Personal contributions to superannuation
You can increase your super by contributing to your personal super fund or your spouse’s super fund. Personal super contributions are the funds you donate to your super fund after tax (that is, from your take-home pay).
- are in addition to any mandatory super contributions made by your employer on your behalf; and
- do not include salary sacrifice contributions.
Personal contributions are non-concessional contributions and will be counted against your non-concessional contribution maximum unless you claim a tax deduction for them.
Personal super contributions that are tax deductible constitute part of your concessional contributions. Spouse contributions are not tax deductible, but your spouse may be eligible for a $540 spouse contribution tax offset if their income is $37,000 or less. You may be eligible to deduct any personal super contributions you make until the age of 75.
To be eligible to contribute to super and receive the deduction, you must be between the ages of 67 and 75. From 1 July 2019, you may be eligible for a work test exemption if you match the following criteria:
- have a total superannuation balance of less than $300,000;
- met the work test in the fiscal year preceding the contribution; and
- did not use the work test exemption in the previous fiscal year.
To claim a tax deduction for personal donations, you must first complete and submit a valid notice of intent to your super fund. Before you may claim the deduction on your tax return, your fund must accept (in writing) this legitimate notice.
On the ATO website, you may see if you are qualified to claim a deduction for personal super contributions.
You will not be eligible for a super co-contribution if you claim a deduction for your personal contributions.
How to add to your superannuation when you’re not working
Even if you are not working, you can make personal after-tax payments to your super fund if you are under the age of 67.
If you are 67 or older, you can only make personal after-tax super contributions that you plan to claim as a tax deduction if you aren’t yet 75 or older; and have met the work test, which means you have worked for at least 40 hours over 30 consecutive days during the fiscal year.
Otherwise, if you’re a recent retiree who hasn’t taken the work test in the last two fiscal years, you may be eligible for the work test exemption. To be eligible for the work test exemption, you must have a total super balance of less than $300,000 at the start of the fiscal year following the year in which you last met the work test. If you are 60 or older on July 1, 2022, you may be entitled to make a downsizer contribution.
Making a downsizer contribution or claiming your personal super contributions as a tax deduction may lower your taxable income. This can lower your overall tax burden.
Contributions from spouses
The ATO defines a spouse as another person (of either gender) with whom you are in a relationship, who is registered under state or territory law, or who, while not being legally married to you, lives with you on a true domestic basis in a pair relationship.
If you’re in a relationship and made contributions to your spouse’s super fund or retirement savings account (RSA) that were less than the threshold during the fiscal year, you may be eligible for a spousal contribution tax offset if your partner was under 75 at the time the payment was made. The maximum tax credit for spousal contributions is $540.
Distribution of large contributions
Some super funds will allow you to move some of your pre-tax payments from the previous fiscal year to your partner’s super account.
Employer contributions and personal donations for which you have claimed a tax deduction are examples of before-tax contributions. These are referred to as “concessional contributions.” The amount you transfer to your spouse’s super account will not go against their quota. This is due to the fact that it was already deducted from your cap when you made the original payment.
Reach out to an Australian superannuation advisor at Omura Wealth Advisers today, to get adequate information.