The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year.
Whether you are:
- Nearing retirement,
- A high-income earner looking to reduce your taxable income, or
- On a lower income and looking for ways to maximise your super contributions;
there are a few things you can consider at tax time.
Consider maximising your super contributions
If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account.
Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings.
The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction.
Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income.
Consider a one-off contribution to lower your income tax
Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14.
To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000.
Are you eligible for the Government co-contributions to super?
If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions.
Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account.
Taking advantage of Government co-contributions can be a great way to boost your superannuation savings, either for retirement or to save towards buying your first home.
Review your records now
It just wouldn’t be tax time without the fun of sorting through your receipts and documents. If you stay organised throughout the year, however, it doesn’t need to be a headache.
Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation?
Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time.
Looking for more help?
It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible.
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This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.
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