Using Super to Save Tax This Year
Fancy a tax refund for this financial year? Or perhaps just a reduced tax bill? Also interested in building up your retirement savings? Superannuation contributions before June 30 may be the solution.
Everyone under age 67 can contribute up to $27,500 to super in the 2022 financial year and claim a tax deduction for it. This limit includes any employer super guarantee and salary sacrifice amounts.
People from age 67 to 74 must meet the work test to contribute. They must have worked at least 40 hours in a 30 day period during this financial year. Voluntary contributions cannot be made by people who were aged 75 or more on 1st July last year.
For example, a person on a salary of $65,000 per annum has employer contributions of $6,500 made for them. They could contribute an extra $21,000 lump sum and claim a deduction. This would also reduce their taxable income to the bottom tax bracket.
When making this type of lump sum contribution it is essential to complete the Tax Office form notifying the super fund and the ATO that a deduction is being claimed.
If a person needs a larger tax deduction, such as to reduce a capital gains tax bill from the sale of a property or shares, and their total super balance was less than $500,000 on June 30 last year they are also eligible to make catch-up contributions.
The total super contributions allowed in financial years 2019, 2020 and 2021 were $25,000 each. If the person did not contribute the maximum amount each year they can now catch up the shortfall previously missed. This could make them eligible for a $50,000 tax deduction or more, if they can use it.
Information about each person’s previous contributions and how much extra they are eligible to contribute are now available on their MyGov account online.
People with a lower income spouse can also earn a tax rebate by contributing to the spouse’s super. If the spouse’s income is less than $37,000 and $3,000 is put in the contributor will earn the maximum rebate of $540.
A partial rebate is paid if the spouse’s income is up to $41,000 or less is put in. If the spouse is between age 67 and 74 they must meet the work test to contribute.
People whose income is below $41,112 can earn a government contribution to their own super by making a personal contribution. If they put $1,000 in without claiming a tax deduction the Government will add $500 to it.
A partial amount is payable if annual income is up to $56,112. The contributor must be under age 71 and at least ten per cent of their income must come from employment or business. Super options are well worth considering before June 30.