HomeChanges to regulationsOne Simple Way to Pay Less Tax

One Simple Way to Pay Less Tax

Super is real money, and it’s your money. Top up your super now and claim a tax deduction before 30 June, plus help give your super balance a welcome boost.

By the time you retire, your superannuation will likely be one of your biggest assets, so putting some thought into making contributions today may help you achieve the lifestyle you want in retirement.

How much will I need in retirement?

According to ASFA, a comfortable retirement costs approximately $1,154 per week for a couple.

Why make additional contributions?

Making additional contributions could help give your super balance a boost.

As an example, by contributing an extra $200 each month into super as a before-tax contribution until retirement could increase your super balance by $15,376. And there are potential tax benefits as well:

Reduce your taxable income

If you make before-tax contributions from your salary or claim a tax deduction in your tax return for your personal super contributions, you’ll lower your taxable income, which could mean less tax.

Pay less tax on investment earnings

Earnings on your super are taxed at a maximum of 15%, whereas earnings on personal investments outside of super are taxed at your personal (marginal) income tax rate. This can be as high as 45%.

New legislative changes

Increased eligibility to claim a tax deduction on personal contributions

On 1 July 2017, the government removed the 10% maximum earnings condition on claiming a tax deduction for personal super contributions. Now most people under age 75, can claim a tax deduction on personal super contributions.

The tax offset on spouse contributions has been made available to more people. On 1 July 2017, the government increased the income threshold for the tax benefits available when making a spouse contribution. If your spouse has total income of $37,000 or less, and you make after-tax contributions to their super, you could receive a tax offset on spouse contributions of up to $540.

Contribution caps

Before-tax contributions cap – $25,000

There is a cap per financial year ($25,000 for 2017-2018) on the amount of before-tax contributions you can make. This includes salary sacrifice and compulsory employer contributions.

After-tax contributions cap – $100,000 (personal contributions)

There’s a cap per financial year of $100,000 on the amount of after-tax contributions you can make.

To take advantage of the legislative changes to reduce your taxable income or pay less tax on investment earnings, talk to Russel Molin , one of our expert Financial Planners on email Russel.Molin@jvafs.com.au, call us on o8 9383 8300 or book your free consultation here.

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