Tax breaks for boosting your super

If your super balance has not reached its maximum, you are eligible to make concessional contributions of up to $27,500 annually. If the total of the contributions made by your employer or under a salary sacrifice agreement does not exceed $27,500, you are still eligible to make a personal contribution and deduct it from your taxes. It’s a good method to increase your super and lower your taxes.

If you are between the ages of 67 and 74, you must pass the “work test” in order to make personal concessional contributions and be eligible for a deduction. To qualify, you must have put in at least 40 hours of labour over the course of 30 days in a financial year.

The contribution must be received by the super fund before 30 June in order to be eligible for the tax deduction for those payments. Before filing your tax return, you must also notify your super fund of your intention to claim or modify a deduction for personal super contributions by submitting a Notice of Intent. 

Bringing forward unused contribution caps

You could be eligible to carry forward any unused contributions and make a greater tax-deductible contribution this year if your total super balance is less than $500,000 and you haven’t reached your cap in the previous four years. 

For example, you can carry forward the unused $17,500 into the current financial year, make a greater personal payment, and enjoy the tax deduction if your total concessional contributions in the 2021–22 fiscal year were $10,000. If you have made a capital gain, in particular, this is a useful strategy to lower your tax obligation. 

You can boost your superannuation by making the equivalent of five years’ worth of concessional contributions in one year (provided you haven’t reached your balance cap) if you haven’t used your contribution cap, for instance if you recently moved in or have returned from abroad.  

Doubling SMSF’s Benefits

Concessional contributions to self-managed superannuation accounts can be paid in June but not distributed to the member until 28 days later, in July, due to an oddity in the way they are recorded. 

In practice, this means that a member can contribute up to $55,000 in this fiscal year (2 times the $27,500 cap, assuming they haven’t already used their cap), and they will still be eligible for the full tax deduction. 

However, the fund will recognise the contribution in two payments: one in June and a second amount distributed to the member from the SMSF’s reserve in July. The self-employed who need to increase their superannuation and lower their tax bill in a given year will find this technique to be especially useful.  

Contribute to your partner’s super

It makes sense to balance out each person’s super holdings in order to optimise the tax savings for a couple because there is a cap on the amount that may be transferred into a tax-free retirement account.

If you make a contribution of $3,000 or more on behalf of your spouse and their assessable income is less than $37,000, you may be eligible for a tax credit of up to $540.

Super splitting is another strategy for topping up your spouse super. Up to 85% of the taxed splittable contributions from a financial year may be rolled over to your spouse’s account if they have not yet retired and are under the preservation age. 

Considering retiring? Wait Until July 1st.

The general transfer balance cap, or the maximum amount you can transfer into a tax-free retirement plan, will rise by $200,000 to $1.9m as of July 1, 2023.

For individuals who are considering retiring soon, delaying the start of a retirement income stream until after 1 July 2023 will provide you access to the increased $200,000 ceiling on tax-free superannuation savings. 

For more information on Super and SMSF, send an inquiry to the Bates Cosgrave team.