With the June 30 deadline fast approaching, there’s not a lot of time to take advantage of the superannuation concessions and benefits available this financial year.
To help turbocharge your savings before the rules change, here are the top three things to put on your EOFY to-do list.
Maximise non-concessional contributions – tax savings up to $500,000 over 20 years
This month is the last opportunity to contribute after-tax savings of up to $180,000 or, if you are under 65 and can use the bring-forward rule, up to $540,000. From July 1 the limit drops to $100,000pa (or up to $300,000 using the bring-forward rule).
Taking advantage of the current generous limits can be highly valuable. Take this example of what tax savings accumulate on $500,000 invested in super versus a higher-tax environment.
Actual earnings will impact on the final benefits, but assuming a moderate return of 3% above inflation each year, the accumulated tax savings over 10 years compared with investing in the top marginal tax rate of 49% is $90,000.
Over 20 years, with an assumed higher return of 5%pa, the accumulated tax savings compared with investing in the top marginal tax bracket could jump up to $500,000.
If you are making a large contribution before June 30, make sure you think about managing the downside risk of investment markets. This can be done by allocating new contributions to cash and then gradually moving the money into your preferred investment approach.
Maximise concessional contributions – tax savings of up to $11,900
This financial year up to $35,000 can be contributed to super as a tax-deductible contribution if you’re 50-plus, with $30,000 available to under 50s.
Although the super fund will pay 15% tax on this contribution, the resulting tax deduction allows an overall tax saving of up to $11,900 for investors or self-employed workers in the top marginal tax bracket of 49%.
Working together with super can help couples keep things square and maximise tax-free limits
If couples maximise the rules by keeping each super account even, together they could hold $3.2 million tax free at retirement.
Before June 30 is a great time to look at what benefits and concessions may help grow your super as a couple, as apart from the annual benefits this also helps at retirement.
- Make a non-concessional contribution to your spouse’s account to even up balances.
- Check how much income has been received to determine if the $3000 spouse contribution will provide up to $540 in tax offsets, or if aiming for the government co-contribution payment of up to $500 is a better fit.
- If cash flow is tight, set up spouse contribution splitting to occur immediately after the end of the financial year may be worthwhile.
Overall, if you can meet the eligibility criteria, those who can maximise concessions before June 30 will get more bang for their buck.
As super is locked away until retirement, check cash flow and debt levels before contributing extra.
If you need help, see if a reputable business is providing free workshops or seminars on the super changes. If you’re still not sure about what to do, get advice.
Dixon Advisory is holding free seminars on super strategies to consider before July 1.