Save Tax – Opportunities with Superannuation for 2020
When you retire, your superannuation is likely to become an important source of your income. That’s why it’s a good idea to top it up while you are working.
But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions?
Generally, money invested in super is taxed at a lower rate than your personal income tax rate.
But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions?
Generally, money invested in super is taxed at a lower rate than your personal income tax rate.
In the lead-up to 30 June 2020, we want you to be aware of opportunities to save tax with super contributions.
This is tax planning advice, not financial advice, so if you are interested in this strategy, please contact our office to speak with one of our licensed financial advisors before you do anything.
TAX BENEFITS FROM SUPERANNUATION CONTRIBUTIONS
There are several ways you can get tax benefits from super contributions:
HOW CONCESSIONAL CONTRIBUTIONS ARE TAXED
Concessional (before tax) super contributions include employer super contributions made on your behalf, any salary sacrifice contributions you make, or any personal contributions that you claim a tax deduction on in your tax return. These contributions are taxed at 15% when they are received by your super fund (up to a cap of $25,000 per year), provided you earn less than $250,000 annually.
Personal super contributions are especially useful for people who are on higher marginal tax rates or if their employer refuses to set up a salary sacrifice arrangement.
The people who would benefit the most are those who earn above $37,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That’s a big tax saving!
Personal super contributions are especially useful for people who are on higher marginal tax rates or if their employer refuses to set up a salary sacrifice arrangement.
The people who would benefit the most are those who earn above $37,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That’s a big tax saving!
CATCH UP SUPER PAYMENTS – Available from this 2020 year for the First Time
From 1 July 2018, people can make “carry-forward” concessional super contributions if they have a total superannuation balance of less than $500,000. People can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
The first year in which you can access unused concessional contributions is this 2020 financial year.
HOW LOW-INCOME EARNERS ARE TAXED
If you earn more than $250,000 a year (including super), your concessional contributions are taxed at an additional 15%, bringing the total tax on these contributions to 30%. However, this is still less than your marginal income tax rate of 47%. This extra 15% is known as Division 293 tax. Only the concessional contributions which make your total income exceed $250,000 are subject to the additional tax.
If your concessional contributions exceed the concessional contributions cap of $25,000 per year, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can choose to withdraw some of the excess contributions to pay the additional tax.
NEXT STEPS
Please contact us ASAP if you would like to discuss saving tax with super contributions. There are many things we need to check for you to ensure you don’t exceed your super caps, you may need to seek the advice of a licensed financial advisor, you have to get the paperwork right plus the timing of your contributions is crucial to get right to entitle you to a tax deduction for them in the 2020 year.
Contact us today! The sooner we get started, the sooner we can help you save tax – well before 30 June 2020 for enough time to implement tax saving strategies.
For more information, check out our tax minimisation guides below:
Imagine what you could do with your tax saved!
• Reduce your home loan
• Top up your Super
• Have a holiday
• Deposit for an Investment Property
• Pay for your children’s education
• Upgrade your Car
We look forward to hearing from you soon!
About Lan Nguyen
Lan is the Founder and Chief Strategist at Success Accounting Group, Melbourne based CA firm. In a matter of short 8 years she has built up a reputable Chartered accounting firm with 3 offices and a team of 6 professional accountants and support team members. Her mission is to provide Innovative and Strategic Financial advice to help her customers make smarter financial decisions today for a brighter future.
Success Accounting Group is for established business owners who would like help to grow a sustained business. As a business owner you understand what drives your business success with our accounting team taking care of the rest.
To see how you too can benefit from working with us, request your FREE meeting today. Enter your details in the form on the right, or phone us direct on 03 9583 0550.
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Success and Wealth
Success Accounting Group Pty Ltd
Oakleigh, VIC, 3166
