We are now starting to settle in to the new super reforms. Some have been complicated, some not so much, some have had a negative impact and some will be positive.
One of the great reforms that may positively impact you is the ability to make personal concessional contributions to super after 1 July 2017.
Most of us know about salary sacrificing and some of us may already be doing it. If you are not quite sure what salary sacrificing is please read our blog below:
But this does not suit everybody. Personally I don’t always know what my year will be looking like financially at the beginning. What if I sacrifice extra into super but then an emergency arises that I cannot afford? Once it is in there it is very, very difficult to get out (particularly if you are not over 60).
But I do understand the benefits. Building my super is important and reducing my personal tax along the way is a real added bonus.
From 1 July 2017 we will be able to make a lump sum contribution to super and claim a personal deduction if we wish. How great! Nearing the end of the year you may have been squirrelling a little bit away each week and now have a nice amount that you now know you will not need. Imagine if you could put this into your super and receive a tax deduction?….Well after 1 July 2017 you will be able to.
Let’s have a look at an example
Andy earns $90,000 a year and has been putting aside $75 a week in a separate bank account for savings and emergencies. At the end of the financial year Andy has $3,000 left as he needed to use some to repair his car.
On June 28th Andy contributes $3,000 to his super fund and completes a Notice of Intent to Claim a Deduction on the ATO website here: Notice of intent to claim.
So what does this look like?
|No contribution to super||Contribution to Super|
|Tax deduction for contribution to super||$0||Tax deduction for contribution to super||($3,000)|
|Taxable Income||$90,000||Taxable Income||$87,000|
|Income Tax payable||$22,732||Income Tax payable||$21,562|
|Total contributions to super||$8,550||Total contributions to super||$11,550|
|Tax Refund||$0||Tax Refund||$1,170|
Andy lodges his tax return on the 10th July and receives a refund of $1,170. Not only that but he has put an extra $3,000 towards his retirement.
Now that is smart Andy!
Before making any contributions to super please make sure you contact your advisor or accountant to ensure it suits your circumstances.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.