Superannuation at Tax Time
Why should you consider investing in your super?
With bushfires and now the coronavirus (COVID-19) pandemic, the Australian and global economy has been given quite the shake up. With everything else going on, the end of the financial year is not being considered by many.
However, the end of financial year is the perfect opportunity for you to consider investing in your superannuation fund. Using your super at tax time can be a great, tax-effective way to invest as we head towards the June 30 deadline. Here are our top 10 superannuation tips for you this financial year.
Disclaimer
Any advice contained on this page is of a general nature only and doesn’t take into account your personal circumstances or needs. You must decide if this info is suitable to your personal situation or seek advice. Prior to investing in any particular product, you should read the product disclosure statement.
BMK Financial Services is a corporate authorised and credit representative of Charter Financial Planning. (Australian Financial Services and credit licensee AFSL & ACL No. 234665 ABN 20168684008).
1. Let the Government Contribute a Top-Up to Your Super.
If you make an after-tax contribution to your super when your taxable income is less than $53,564, the Australian government may make a co-contribution. This co-contribution from the government to your super is up to a maximum of $500.
To be eligible for the government’s co-contribution, at least 10% of your income must be from your job or a business. There is no application process for this co-contribution. The government will automatically make the contribution if you are eligible after you lodge your 2019/20 financial year tax return.
2. Check Your Insurance Cover Inside Your Super Fund.
If you had your super account prior to April 1 2020, many super funds provided you with an automatic level of total and permanent disablement (TPD), death, and income protection insurances. However, changes to the rules now mean that you need to opt-in for insurance cover in inactive or low-balanced super accounts. If this is something that may affect you, it is important to review your level of cover and assess whether it suits your needs.
3. Claim a Tax Deduction on Extra Super Contributions.
You may be able to claim tax deductions on voluntary contributions that you make out of your after-tax income or from your savings. These voluntary contributions are those that you make above the compulsory 9.5% super guarantee (SG) from your employer.
These personal (concessional) contributions count towards the concessional contributions cap of $25,000. These include SG contributions you make as a salary sacrifice.
4. Reduce Your Tax by Boosting Your Spouse’s Super.
Does your spouse earn less than $40,000 this financial year? If so, you can make a contribution to their super, you may be able to claim a tax offset (tax rebate) of up to $540 on your tax return.
5. Consider a Salary Sacrifice Arrangement at Work.
Salary sacrificed contributions to your super is only taxed at 15% rather than your higher marginal tax rate. This process involves your employer deducting an agreed amount of pre-tax wage or salary and putting it onto your super.
This strategy can help to minimise your tax rate, while assisting in building long-term wealth. Salary sacrifices come under the annual concessional contributions cap of $25,000.
6. ‘Catch-up’ Your Super Contributions.
You may be eligible to make ‘catch-up’ contributions to your super if you didn’t use the whole concessional contributions of $25,000 in the 2018/19 financial year.
If you have a total superannuation balance of less than $500,000 on June 30 of the previous year (from July 1 2018), you may be entitled to make a contribution over the concessional contributions cap for any unused amount.
7. Make Use of the First Home Super Saver (FHSS) Scheme.
If you are saving for your first home, the FHSS scheme enables you to make a pre-tax contribution (up to $15,000) in any financial year to help in saving for a deposit up to a maximum total of $30,000.
When you have enough saved for your home deposit, you can then withdraw those funds from your superannuation account. This scheme is beneficial as it enables you to pay a tax rate of just 15% on your contributions (lower than marginal tax rates). You can also claim these contributions as part of the tax deduction in your concessional contributions.
8. Utilise Your Super to Pay for Your Personal Insurance.
Reviewing your insurance premiums can be crucial to saving money. In fact, your superannuation fund can be a great place to pay your insurance premiums from. Not only do most super funds offer life, TPD and income protection insurance, holding them through your super fund can often provide lower fees.
9. Take Advantage of the Non-Concessional Contribution Rules.
You may be able to make non-concessional contributions up to three times the annual cap in a single year if you are under 65 years old. If you are eligible, the bring-forward arrangement enables you to automatically gain access to future year caps when you make contributions greater than the annual cap.
10. Contribute Proceeds from Your House Sale to Your Superannuation.
If you are over 65 and meet other eligibility requirements, you can make a ‘downsizer’ contribution from the proceeds of selling your home. This contribution is capped at $300,000. This contribution does not count towards your contributions cap. It can still be made even if your super balance is greater than $1.6 million.
Are You Interested in Making the Most of Your Money at Tax Time? Or Just Interested in Getting More Information?
Contact BMK Financial Services on 0423 621 120 or brad@bmkfs.com.au
Brad Lonergan has 0ver 20 years experience in the Financial Services industry. He helps individuals and families plan for their best financial future. BMK Financial Services primarily services those in the Lake Macquarie and Newcastle area, but his expertise has seen him work with people all across Australia.
