Every year in May and June we all start realising: "Another year has gone by, I have hardly paid any attention
to tax and superannuation. Is there anything that I can do right now
to improve my super and reduce my tax?"
Today I want to show you 4 strategies that will provide you with tax reduction and improvement of your superannuation balance at the same time .
But wait until the very last strategy to find out how you can make 50% capital return guaranteed immediately.
Are you curious? Well.......you better stick around then to find out.
My name is Katherine from About Retirement. I am Certified Financial Planner
and most of my videos are for people approaching retirement or those who have already retired,
but today's video is virtually for anyone working or anyone who has any type of accessible income.
OK, so let's dive in:
1. Personal contributions for which you claim tax deduction.
This is a type of contribution that can be used to invest a lump sum just before
the end of the financial year, where you know exactly your budget surplus, your income for the year,
and your approximate tax payable. So this strategy can be used:
if you are self-employed as your income varies from month to month,
if you sold a major asset and could be paying Capital Gains Tax,
if you have no salary sacrifice arrangement with your employer,
if you have extra savings that can be locked away in superannuation and you also expect a high tax bill,
or if you want to make catch-up contributions otherwise known as carry-forward contributions,
and you have sufficient cash available to invest into your super.
If you don't know this type of contributions or would like to fully understand how they work
watch this video: "Catch-up carry-forward concessional super contributions"
to find out all the little details.
Don't forget that doing this type of contribution you need to advise your super fund
of your intention to claim tax deduction for contributions made.
Your contributions together with the notice of your intent needs to be received by the super fund prior to the 1st July,
and please do not count on making those contributions and the notice to your super fund
in the very last day of the financial year, as your super fund may not receive your funds on time.
Also you need to receive an acknowledgement from your fund before you lodge your tax return.
2. Salary Sacrifice.
Salary sacrifice is a brilliant way of saving within superannuation environment, which not only allows you to save tax,
but contribute to your superannuation fund extra money.
It is through the agreement with your employer, where you sacrifice portion of your income
to be paid as an extra, over and above your employer compulsory contribution from your pre-tax income.
Your tax savings come from the difference between your marginal tax rate and a super contribution tax rate of 15%.
The higher your income, the bigger the difference, the greater your tax savings.
To understand all those little details of salary sacrifice arrangements and benefits,
check out my video: "Salary sacrifice - Tips, Traps and Benefits".
If you are in a financial position to set up salary sacrifice, organise this now for the new financial year.
So speak to your employer or your payroll department, arrange it before 30th of June and
enjoy your tax savings in the next financial year as well as fantastic growth of your super savings.
3. Spouse Contributions
This one strategy is very much disregarded by most families and it is money saved on your tax bill.
If your spouse's income is below $37,000, contribute $3,000 or more to your spouse's super
as spouse contribution and you could be eligible for $540 tax offset.
OK, maybe that's not money into your hand but that's always $540 less of tax that you pay otherwise to the tax office.
That is an immediate reduction of your personal tax bill.
If your spouse's income is greater than $37,000 you could still be eligible for partial tax offset but
once the income is above $40,000 you will no longer be eligible for any tax refund.
4. That's the big one. We are all waiting for this one.
How do you get an immediate 50% return on your investment guaranteed?
Well.......if you are a low or middle income earner and you make an after-tax contribution to your super fund
and you don't claim a tax deduction for that part of your contributions,
you might be eligible for a government co-contribution of up to $500.
So, if your total income is equal or less than $39,837 for the financial year 2020/21
and you make a non-concession contribution of $1,000 you will also receive a government co-contribution of $500.
So basically with zero risk, no investment has even been made,
you've just contributed $1,000 to your super, government will add an extra $500.
As far as I can count that is a GUARANTEED ZERO RISK return of 50% on your $1,000 contribution.
If your income is slightly higher, between $39,837 and $54,837 this financial year,
your co-contribution will be reduced progressively but it is still worth doing as co-contribution is really free money for you.
One thing is contribution, the other what to do with my money and how to invest it.
I have created an eBook "12 Principles of Investing"
I've listed a link to this eBook in the description below this video,
so feel free to download it and apply to your investing decisions.
So how did you enjoy my super strategies for the end of this financial year?
Well, leave the comment below the video and let us know
which one of those super strategies will work for you the best?
If you enjoy this video give it THUMBS UP and
SUBSCRIBE to my channel not to miss my next video.
And now some extra important information for you to consider:
There are limits on how much you can contribute to super. Please do not go over those limits as penalties may apply.
Contributions need to be received prior to 30th June for you to be able to claim tax deduction,
tax concessions, or apply any of those strategies to your current tax return.
Be careful with a total super balance cap of $1.6 mil of non-concessional contributions.
That cap limit will increase to $1.7 mil in the next financial year.
If you exceed the cap, you will not be able to make any further
non-concessional contributions and you may not qualify for other government concessions.
Based on current rules if you are over the age of 67
a work test applies to you if you wish to make voluntary contributions.
There is a limit of how much super you can transfer into a pension,
and upcoming changes could impact whether you should move your super balance now or later.
In order to have access to your super savings you have to meet conditions of release,
such as retirement for example.
So be aware that until you do, your savings are really stuck
within superannuation environment.
I really hope you found this video helpful in organising your superannuation strategy,
either for the end of the financial year or as part of your ongoing saving regime,
which is obviously what I always recommend.
If yes please LIKE this video to let YouTube know it is a quality video worth showing to other viewers.
And SUBSCRIBE to this channel, as I will continue bringing you more and more financial information every week.
And now I would like to invite you to watch those mentioned videos:
1. Full explanation of salary sacrifice, why you should consider it, benefits, traps to watch out for, and how to set it up
2. If you are thinking of your personal contributions, this is the video to watch:
"Catch-up, carry -forward concessional super contributions"
where you will find out exactly how to calculate
your maximum benefit for this strategy.
I will see you next time. Bye.