End of Year Planning

With June 30 just around the corner, now marks the perfect time to check in on your savings to make the most of any concessions available to you.

EXTRA CONTRIBUTIONS

Salary Sacrifice – You can up the ante of your retirement savings by having your employer direct some of your pre-tax salary to your super fund.

In addition to boosting your super savings implementing this strategy can reduce your overall tax bill for the year as money going to super is only taxed at 15 per cent, which is a lower rate than many people’s personal marginal tax rates.

There is a limit to the amount that can be contributed into super by your employer so you need to check with your HR to ensure you haven’t breached your limit. For those under 50, up to $30,000 can be contributed by your employer. Over this age, the amount is $35,000.

Personal Contribution – You can also boost your retirement savings by making a personal contribution from your savings.  Cash contributions are not subject to tax on arrival, and any future capital gains or income earned are currently treated more favourably than in your personal name.

In addition to making a cash contribution you can also look at making an in-specie transfer of other assets such as shares or property into super.  This may have CGT and stamp duty contributions.

Again there is a limit as to how much you can contribute into super as a non-concessional contribution.  The current limit is $180,000 each financial year.  However, there is the option to combine three years’ worth of contributions and contribute up to $540,000 in one go.  This option rules out the option to use any personal savings over the coming two financial years.

Government co-contributions – Anyone earning less than $50,454 this financial year is eligible to receive a Government Co-contribution if they make a personal contribution.

The co-contribution scheme means that, for every dollar you put into super from your after-tax pay, the government may match it with up to 50 cents for up to $500.

The amount of government co-contribution you can receive depends on how much you contribute and what your income is. You don’t need to apply for the co-contribution, if you’re eligible the ATO will pay it to your fund account automatically.

Spouse contributions  – If your spouse earns up to $13,800 a year you can make a contribution into their super on their behalf and receive a tax offset.  Specifically, you can put in as much as $3,000 into their super and receive an 18% tax offset—saving you up to $540 in tax.

TAKING A PENSION

Those aged 55 and above are entitled to access their super – by taking a pension even if they are still working.  The primary benefit of commencing a pension from your super funds is that any earnings in the pension phase don’t attract tax on capital gains or income.  However, you must withdraw a minimum pension of 4% from your fund. As you age, this amount increases.

If the pension income is superfluous to your income needs then the funds can be contributed back to either yours or your spouse’s super fund as discussed previously  – provided you remain eligible to contribute to super. Alternatively commencing a pension enables you to reduce your working hours as you near retirement.

Anyone under age 60 should be aware any money taken as a pension must be included in your annual tax return. This money can receive up to a 15 per cent tax offset against your ordinary tax rate.

If you would like to discuss any of these strategies as part of your end of year planning please contact your SMSF Adviser.   Remember that successful planning makes for successful investing!