One way you can minimise your personal tax this year
New rules make it easier to make a personal contribution to super and reduce your personal tax liability. But you need to act quickly.
The new superannuation rule which allows everyone – including employees – to make super contributions and claim tax deductions for them will benefit many people this year.
What’s the catch?
You have to make a contribution before the financial year end, (30 June 2018) so you need to decide now, if this is a good option for you.
What you need to know about super and tax.
If your taxable income is likely to be above $37,000, (which is where the 34.5 per cent tax bracket starts) you could make a substantial tax saving with a super contribution.
Why? Because money going into superannuation is taxed at a lower rate – 15 per cent.
There is a limit on contributions.
The annual limit for tax deductible or concessional contributions to your super fund is $25,000 per person, per financial year. So, the two things that you need to take into consideration are:
1.What is my taxable income likely to be?
2.How much has already been paid into my super fund for the year? (This includes your employer contributions)
How it works.
“Although for some people, the tax benefit may seem small, it’s important to consider that every dollar you put into your super fund is working towards your future, so it is worth it,” says Jason Rapley from MoneyLink Financial Planning Ltd.
“On an income of $80,000 per annum, for example, by putting $5,000 you receive a tax credit of $1,725, the numbers might seem like they don’t really stack up in your favour – but they do, because you’re still adding to your super which will benefit you in the long run. It’s a great way to save for your retirement.”
Important considerations: Big bonus? Capital Gains? Self-Employed?
If for any reason you have a high income this year, perhaps you’ve received a bonus, or significant capital gains through the sale of a property or other investments, then putting money into your super can help you to minimise the tax you will pay. Self-employed people who’ve had a good earning year can also benefit from this strategy.
“No matter what age you are, or what stage of your working life, contributing to your super is always a good option to consider if you have some spare, or unexpected cash (provided you keep to the limit of annual contributions) and the new rules make it more attractive because you can receive some tax benefits too,” says Jason.
Act now – FYE is nearly here.
Any contributions that are going to qualify for a tax deduction this financial year need to be made within the next few weeks, in order to have the appropriate paperwork completed in time for the financial year end on June 30 2018.
“Not everyone will be eligible for this, and every super fund is different so there are some considerations. Talk to us, and we’ll help you work through all the options,” says Jason.
Jason Rapley is an Authorised Representative of MoneyLink Financial Planning Pty Ltd,
an AFSL holder, No. 247360.
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