Reduce your tax

Superannuation contributions can be an effective strategy to reduce your tax

But don’t leave it too late!

With increased contribution activity at this time of year, and the added administration associated with clearing houses, congestion can slow down the timing from when you make a contribution and when it is recognised by your super fund

You should act as soon as possible to make your contribution deductible for 2023 financial year

CONTRIBUTIONS CAP

The maximum concessional contribution cap is $27,500 per year

You may also have an unused carry forward concessional contribution cap.  From 2019 if you didn’t contribute your annual cap the unused balance carries forward.  So long as your super balance is less than $500,000 you can access the carry forward cap.

Other super contributed for you during the year will count towards your contribution cap – such as SGC paid by your employer and any amounts you have salary sacrificed

Subtract these amounts the $27,500 cap to know what additional amount can be contributed to claim a tax deduction

For example, if you have

·      $7,500 super guarantee SGC paid by the employer

·      $5,000 salary sacrificed throughout the year

Then you will have a balance of $15,000 that could be contributed and claimed as a tax deduction. If you have the ability to utilise unused amounts from previous years, then this amount may be higher

The links below provide further information :

Key superannuation rates & thresholds

Carry forward concession contributions

AGE RESTRICTION

You must be under 75 years of age to make a personal concessional contribution

IS IT TAX EFFECTIVE?

When the super fund receives a concessional contribution, it will apply 15% contributions tax.  So, you must consider the overall tax effect.   If you are contributing so much that takes you under the individual tax free threshold (approx. $20K) then you will be paying tax in the superfund, but not saving any tax in your individual tax return

TIMING

The payment should be made by no later than 15 June as the superfund must receive the payment before 30 June. If you are reading this after15 June, then we recommend you contact your superfund and confirm with them if a payment made today will be effective

NOTICE

You must notify the superfund of your intention to claim a tax deduction. Some superfunds provide for this via your member website login, otherwise you can fill out the required form (link below) and email this to them

Notice of intention to claim a personal super contribution as a tax deduction : Click for form

Making a personal superannuation contribution : Click for more information

If you have any queries regarding the above, please contact your friendly Eagle accountant