We’re approaching the end of the financial year and many Australians are scrambling for ways to pay less tax. Here are five tax-saving strategies that you can do with your super that will put more back in your pocket at tax time.
1. Salary sacrifice
One of the simplest tax-saving strategies with super is salary sacrificing. Arrange with your employer to make personal contributions to your super straight from your pre-tax salary. This will reduce your taxable income, putting more money in your pocket and boosting your super balance in the process. Just ensure that your deductible personal and employer contributions don’t exceed the $27,500 concessional contribution cap (or carry-forward concessional contribution cap if your total super balance is less than $500,000). Any amount over the concessional contribution cap will be taxed at the top tax bracket.
2. Boost your super
Transfer some of your savings into super as a lump sum and claim a tax deduction. But note that this is only an effective strategy if you haven’t yet reached the $27,500 concessional contributions cap (or carry-forward concessional contribution cap if your total super balance is less than $500,000), as any amount over this cap will be taxed at the top tax bracket. Also keep in mind that you can’t access your super until you retire and reach your ‘preservation age’ — between 55 and 60, depending on when you were born. This may not be a good strategy if you’re looking to buy a home or reach other goals. It’s a strategy that should be considered as part of your long-term financial plan.
3. Split with your partner
You can allocate part of your last year’s concessional super contributions to your spouse. That way, you’re bolstering up their balance and helping to keep a lid on yours. The closer you can make your super balances, the more tax effective you’ll be in retirement.
4. Grab the super-government top-up
For those who earn less than $58,445 and more than 10 percent of your income is from employment (i.e. not investment income) the government will match your after-tax super contribution up to $500. That’s free money you’d be crazy to turn down.
5. Claim a tax offset for your spouse
If your spouse earns less than $40,000, you can contribute up to $3,000 to their superannuation fund and get a $540 tax offset for your own tax return. Note this is a tax offset, not a tax deduction. This means you’ll get $540 back as a return or a reduction in the amount of tax that you pay. This is a win-win for both of you as it reduces your tax bill and boosts your partner’s retirement savings.
Use a good accountant
The Australian and super tax system isn’t the easiest to get your head around. We highly recommend you seek the services of a good, qualified accountant to maximise your tax deductions. A good accountant will take the time to understand your personal situation and give you strategic tax advice to minimise your tax obligations in the future. You’ll also have the peace of mind of knowing your return has been accurately prepared in compliance with tax laws in the event you are subject to an audit by the ATO.