Contributing to super and claiming a tax deduction
It’s easy to forget that there is one way the Government has made it easier to save tax and get money into super with all the contribution cap rules.
Here’s the very good news! Since 1 July 2017, people under the age of 75 are eligible to contribute money from their bank account to their super and claim a tax deduction for it (if certain conditions are met).
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 15%. That’s a big tax saving!
Things to remember:
- There is still a $25,000 concessional contribution cap, which includes any guaranteed contributions your employer puts in and any salary sacrificing you do.
- Personal contributions are only tax deductible if you ask your super fund to treat them that way. Therefore, there is paperwork to be done. We can help you with this.
- Anyone over 65 must meet certain conditions to contribute to super, namely the ‘work test’. The ‘work test’ involves working 40 hours in any 30-day period in the financial year in which you plan to contribute. You must be paid for that work.
- Claiming a tax deduction for your personal contributions means there may be tax payable on the way out of your super.
If you get unexpected bonuses, have a high marginal tax rate, or don’t like to or can’t salary sacrifice – this strategy may be something to consider!
Contact us for assistance with making your super contributions. There are a few things we need to check for you to ensure you don’t exceed your super caps, plus the timing of your contributions is crucial to get right to entitle you to a tax deduction.