Money Matters Monday 26th March 2018
With tax time not far away, check new super rules to find tax deductions
Major changes were made to the superannuation rules last July, and some are quite beneficial. With the end of the financial year not far away now the new rules are well worth understanding. They provide large tax saving opportunities for many people.
Some tax deductions are available.
This will enable many people who don’t usually qualify for a tax refund to receive one. Self-employed people have always been able to contribute to super and claim a tax deduction but employees were not able to do so.
That has changed. Now anyone who needs a tax deduction and is under age 65, or who are aged 65 to 74 and still working, can contribute to super and claim a tax deduction. The only other rule they must abide by is the maximum concessional contribution limit of $25,000 per annum.
This limit includes employer contributions such as super guarantee and salary sacrifice amounts as well as the newly allowable personal deductible contributions. These personal contributions can be either a single lump sum or as a regular savings plan.
A savings plan over a full year with contributions every month or payday is the most pain free way to qualify for a large deduction. However, with only three months of the financial year remaining a lump sum contribution may be the only option.
People with savings in the bank can earn a rapid tax refund. Contribute $1,000, $5,000, $10,000 or more soon, lodge a tax return in July and receive a refund soon after.
Self-employed, part-time workers and contractors also benefit
People who work part of their time as employees and part as contractors or self-employed have not been able to claim super tax deductions before unless their salary income was less than ten per cent of their total earnings. That rule no longer applies.
Examples of people in this situation include farmers who work in town during the week and doctors who split their week working as employees of the health system some of the time, and also in their own medical practice.
People who have had an unusually high-income year will find this option attractive. They might have earned extra income from a second part time or casual job for example.
Have you sold an asset?
Others who have sold a property, shares or other assets and realised a taxable capital gain can also benefit from this new rule. If they contribute part of their sale proceeds to super they can claim a deduction to offset their capital gains tax liability.
As super is not accessible until close to retirement people in the mid to later stages of their working career will find this new rule most useful. However, putting a little extra in super at a young age will also make a large difference come retirement time.
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