With the end of financial year fast approaching now is the time to start thinking about making the most of some opportunities that may be available to you to help reduce your tax bill and/or boost the retirement savings of either yourself or your spouse now and into the New Year.
- Get a super top up from the Government
If you earn less than $33,516 p.a., you may qualify for a tax-free top-up to your super in the form of a Government co-contribution of up to $500 if you make an after-tax contribution to super of $1,000 this financial year.
If you earn between $33,516 and $48,516, this financial year, you may qualify for a partial Government co-contribution as the $500 you could be eligible for slowly phases out between these two income limits.
- Get More from your salary or bonus
If you are an employee you can generally enter into a salary sacrifice arrangement with your employer whereby you choose to give up or ‘sacrifice’ some of your before tax salary (or bonus) and add it directly to your super account.
The money you ‘sacrifice’ to superannuation is only taxed at 15%, rather than you marginal tax rate, which can potentially save you up to 31.5%, tax depending on your marginal tax rate.
With the proposal in the May 2014 budget to increase the top marginal tax rate by 2% from 1 July 2014 (for 3 years) this strategy becomes even more powerful next financial year, increasing the potential tax saving to 34% for higher income earners.
It’s a good idea to try and get any salary sacrifice arrangements in place before 30 June, as you cannot salary sacrifice income (including bonus payments) that you are already entitled to. Salary sacrifice arrangements must relate to income that you will earn in the future, not what you have already earned.
Also, be aware that there are limits to the amount of money you can sacrifice to super and only pay 15% tax and these limits include any money your employer already contributes to superannuation for you. Be sure to get advice before implementing this strategy.
- Boost your spouse’s super and reduce your tax
If your spouse earns less than $13,800, you may qualify for an 18% tax offset if you contribute up to $3,000 to their super fund. That’s a potential saving of up to $540 in your tax return this year and a nice kick along for your spouse’s retirement savings.
I’ve only briefly outlined three potential opportunities to reduce your tax bill and/or give your families combined retirement savings a boost, there are a number of others available that will form the basis of posts to come in the future.
If you’d like to find out what other opportunities are available to you please don’t hesitate to contact me and as always if you are considering any of the strategies outlined above you should seek professional personal financial advice before doing so to determine that the strategy is right for you.