With the end of the financial year quickly approaching, now is the perfect time to review your superannuation contributions with your adviser.
Concessional contributions to super (those that go in before tax) are taxed at 15% (30% for those with an income above $250,000). If you have built up savings throughout the year and your marginal tax rate is above the concessional super rate, a contribution before June 30 might help reduce your tax liability and boost your retirement savings.
The annual cap for a concessional contribution to super is $27,500 for those eligible in 2023/24 and includes employer contributions (superannuation guarantee), salary sacrifice, and personal deductible contributions.
Making a contribution to super is nothing new. However, before 1 July 2017, in order to make a personal deductible contribution, you had to be ‘substantially self-employed’ (i.e., earn no more than 10% of your income as an employee). It is now much easier to tweak or maximise your contributions, even if you already have a salary sacrifice agreement in place. Your adviser will be able to guide you through the process.
Starting July 1 2024, the diluted stage three tax cuts will reduce the personal tax rate for all Australian taxpayers. This means a super contribution in FY24 will likely give you a better net benefit than if you wait until after July 1.
If your super balance is below $500,000, there is also the ability to catch up on your unused contributions from the previous five years.
For the contribution to be claimed in 2023/24, it must be received by the superannuation fund before June 30, 2024. In 2024, June 30 is a Sunday, and if your contribution is processed by your super fund after this date, it will count towards your cap for 2024/25.
There are strict rules about the process to follow to claim a contribution as a tax deduction, and plenty of traps that can reduce or invalidate the deduction.
