Did you know you can claim a tax deduction for putting up to $27,500 into your super? That means if you put say $10,000 into your super, you could get a tax refund of up to $4,700 depending on what you earn.
Tax deductible contributions into super are taxed at 15% on the way into the fund. You then claim them as a tax deduction in your personal income tax return and if you’re earning between $45,000 and $120,000 than you get a personal tax refund of 34.5%.
If you’re earning under $45,000 the refund is 21% and if earning over $120,000 it’s 39%. That’s pretty handy, it’s like the government giving you an immediate return of 6% to 24% on your money on top of any actual interest it earns. On top of that you’ve put it away where it should grow to fund a good retirement lifestyle, smart.
As always, the devil is in the detail so get some advice. The $27,500 is the current annual cap on tax deductible contributions but remember these include the compulsory super your boss pays in. From 1st July that annual cap goes to $30,000 for the new financial year.
If you super balance is under $500,000, you may also have the option to make ‘catch up concessional contributions’. This allows you to make up for the last 5 years unused concessional contribution cap. I.e., if you’ve only had $10,000 go in per year the extra, unused $17,500 carries forward and you could make a huge contribution in one year.
Your accountant can run a simple ATO report showing what you’ve got available in catch up contributions or you can get it from your MyGov if you have the ATO linked.
As of 1st July 2024, any unused cap from the 2018 Financial Year drops off so you should at least consider catching that up before 30th June, or it’s gone. This is especially true for self-employed people who often neglect their super, which can come back to haunt them at retirement.
The key to making big financial decisions, just like making a big purchase, is doing your homework. You wouldn’t buy a boat or caravan without some research. How much is your boss paying in? What about Salary Sacrifice? What is your carried forward allowance? Are you confident your existing super fund is good value and is getting a good return?
These are the sort of things that financial planners will work out, often with the assistance of your accountant. They should also provide some guidance around the right investment choice within your existing super or recommend a better super fund if required. Start the conversation now so you have time to make a good decision before 30th June. Plenty of people get caught each year by leaving it too late.
If you think you could benefit from a discussion with a Financial Planner, give us a call on 49467359 of visit www.eclipsefp.com.au. There’s no obligation, the first meeting is free and all fees are spelled out clearly in advance.
