Right now we are conducting a number of really valuable tax planning sessions with our clients and so far the results have been amazing with many thousands of tax dollars saved through our various strategies.
Over the past few weeks we have been running a series of editorials outlining just some of our tax planning strategies. Our editorials continue today with a look at Superannuation Contributions and why you should proceed with care before 30th June
With the 2014/2015 year coming to a close you may be considering making changes to your superannuation contributions and taking advantage of the tax savings in this area. Today we take you through a few of the options available and some of the detail that you would want to be aware of in this decision making process.
Superannuation is without doubt the single most tax effective plan and opportunity available to most Australians – the trade off taxpayers are offered by the Government is that for that tax benefit there a number of very specific rules. Mostly these are to do with tax deductibility, contribution limits and access to funds. In the lead up to 30 June we have a focus on tax deductibility and contribution limits.
Contribution Strategies in a Nutshell.
Four year end strategies are outlined below in point form. If any or all of these take your interest we have a more detailed discussion below on the first three topics further on in this editorial. If the last item is of interest we strongly recommend a discussion with your accountant prior to commencing this strategy as issues of Capital Gains Tax, Stamp Duty and Contribution Limits need to be carefully considered prior to execution of this strategy.
• Consider increasing your salary sacrifice to the maximum amount permitted concessional cap or, if eligible, making a lump sum concessional contribution prior to 30 June
• Consider contributing any spare cash that is in your personal name into the super fund as a personal contribution up to the non concessional cap prior to 30 June
• If you are a low or middle income earner consider putting in a $500 personal contribution into your Super fund prior to 30 June to access the Government Co-Contribution as an effective way of increasing your retirement savings
• If you have a Self Managed Superannuation Fund (SMSF) consider what shares and commercial property you own out side of the SMSF and consider if this can be placed inside the SMSF. It requires expert advice to execute this strategy and should not be undertaken before speaking to your accountant.
Strategy 1 – Concessional Contributions and the Caps:
What it means?
Concessional contributions include:
• Employer contributions (including contributions made under a salary sacrifice arrangement); and
• Personal contributions claimed as a tax deduction by a self-employed person or a person who is not employed at all (eg: retirees, stay at home spouses, passive income earners)
• Personal contributions claimed as a tax deduction by a substantially self-employed person or a person who is not substantially employed, this is subject to the 10% deductibility rule as per below.
Concessional contribution caps:
10% Deductibility Rule:
If you are substantially self-employed, or substantially not employed, but also an employee, you can claim a tax deduction for a super contribution when your income as an employee is less than 10 per cent of your total income.
• Total income for the purposes of the 10 per cent rule is assessable income (gross income before tax deductions) plus salary sacrifice contributions (also known as reportable employer super contributions) plus reportable fringe benefits.
• You’re eligible to make tax-deductible super contributions when your employment income is less than 10% of your total income. Note that Superannuation Guarantee contributions do not count towards total income or employment income.
Strategy 2 – Non-Concessional Contributions and the Caps
What it means?
Non concessional contributions include personal contributions for which you do not claim an income tax deduction.
Non-concessional contributions cap for a given income year:
Non-concessional bring-forward cap:
People aged under 65 years on 1 July in a financial year may be able to make non-concessional contributions of up to three times their non-concessional contributions cap over a three year period. This is known as the “bring forward” rule.
The bring-forward cap is three times the non-concessional contributions cap of the first year. If you brought forward your contributions in 2014/15, it would be 3 x $180,000 = $540,000
Strategy 3 – Government Co-Contribution:
What it means?
The super co-contribution is designed to assist eligible individuals to save for their retirement. If you are eligible and make personal super contributions during a financial year, the government will match your contribution with a super co-contribution up to certain limits.
If you have missed any of the previous editorials you can view them at http://www.mcmahonosborne.com.au/www/content/default.aspx?cid=1010 or if you wish to book a tax planning session with one of our tax planning specialists call Lynda on (03) 9744 7144 or email email@example.com