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Superannuation remains one of the most attractive investment vehicles available, and certainly the most attractive for saving and investing for retirement. With a maximum 15% tax on earnings in accumulation phase, tax-free withdrawals over age 60 and tax free earnings in pension phase, ensuring you make the most of the super environment makes a lot of sense. There are annual limits on how much you can contribute to superannuation, so what are the key strategies available to you before 30 June this year?
You have an annual pre-tax (concessional) contribution cap of $27,500, for which deductions can be claimed. This amount includes your employer contributions (superannuation guarantee and salary sacrifice), as well as any amount you contribute personally and claim a deduction for. You’ll need to be under 67 to be able to contribute and claim a deduction without meeting a work test; if you’re between 67 and 75, you’ll need to meet a work test in order to claim an amount off your tax.
If you, like most people, haven’t used your full $27,500 concessional limit in previous years, you can ‘carry forward’ unused amounts and claim a deduction for them this year. Your super balance must have been under $500,000 at 30 June 2022 in order for you to use this strategy in the current financial year, and you can only carry forward available amounts from 2019-20. The cap was $25,000 until 1 July 2021, so check what carry forward amounts are available to you before using this strategy.
If you have used your concessional contributions cap and still wish to boost your super balance, you may wish to consider using non-concessional (after tax) contributions. These are limited to $110,000 per annum, and form part of the tax-free component of your super. You can contribute up to three years’ worth of non-concessional contributions in one year using the ‘bring forward’ arrangements, bringing your contribution to $330,000; if you are nearing retirement and wish to maximise your total contribution, you could consider making a $110,000 before 30 June and a further $330,000 from 1 July. You can only make non-concessional contributions if your total super balance is under $1.7m.
You can also consider spouse contributions (where your contribution of up to $3,000 to your spouse’s account could give you a tax rebate of up to $540 if your spouse’s income is less than $40,000 this year), or take advantage of co-contribution if you’re a low income earner.
There are lots of strategies to take advantage of, that allow you to boost your super and reduce your overall tax liability at the same time. Given the complexity of the rules, make sure you check out the ATO website or speak to a tax professional to ensure you get it right.
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