Pay less tax now and maximise your super cap
The opportunity to make large concessionally taxed super contributions is now a thing of the past. With caps on how much we can put into super, it can be highly beneficial to really important that you contribute as much each financial year to boost your super savings (if your cashflow allows)*, without exceeding the cap.
What are concessional contributions?
Concessional contributions include employer contributions - such as the superannuation guarantee and contributions made under a salary sacrifice arrangement, as well as personal contributions claimed as a tax deduction.
These contributions are taxed in the fund at a maximum rate of 15% (an additional 15% tax may apply for some people who earn a high income which will be taxed personally). This could be lower than the marginal tax rate that would be paid on salary or other sources of income.
In the current financial year, these contributions are capped at $35,000 pa if you were 59 years of age or older on 30 June 2013 and $25,000 pa for everyone else.
Maximise your cap
Unfortunately if you don’t use all of your cap each financial year, you can’t carry forward any unused amount into the next financial year. So it really is a case of ‘use it or lose it’. Taking full advantage of your concessional contribution cap each year between now and when you retire will maximise your retirement savings and ensure you can live the retirement lifestyle you want.
But don’t overdo it
While super is a very tax-effective way to save for your retirement, making contributions that exceed your cap can result in you having to pay more in tax.
Concessional contributions that exceed your cap are now included in your assessable income and will be taxed at your marginal tax rate Also, the “excess concessional contributions tax charge” (which is like interest charged) will also apply. Your excess concessional contributions may also be counted towards your non-concessional contributions cap (if you do not choose to have them refunded to you).
If you’d like more information on how to effectively plan for the retirement you want, please contact Vertex Group Pty Ltd on (03) 9832 0677. We’ll review your retirement plans and put together a contribution plan that makes the most of your opportunities, without triggering unnecessary tax bills.
* Concessional super contributions currently are capped at $25,000 pa, for people aged 58 or under on 30/6/13 and $35,000 for people aged 59 or over on 30/6/13. From 1 July 2014, the general concessional cap will be increased to $30,000. For people aged 49 and over on 30/6/14, their concessional cap will be $35,000.
This document contains general information only. Vertex Group Pty Ltd is not a registered tax agent. If you wish to rely on this to determine your personal tax obligations you should consult a registered tax agent. This information did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 20 March 2014.