By making personal contributions to your super, you may be able to claim a tax deduction to reduce your tax liability. See how in the following example:
Helen is a 43 year old self-employed florist earning $45,000 p.a. and is also employed part-time as a teacher earning $30,000 of employment income. Her employer makes Superannuation Guarantee contributions of $2,850 p.a. which count towards the concessional contributions cap ($25,000 for the 2017/18 financial year). Her marginal tax rate is 34.5% (including Medicare levy).
During Helen’s annual review, her financial adviser recommends she should contribute more to super as she nears retirement. She advises Helen to make a $20,000 personal deductible contribution to super to increase her retirement savings and to reduce her taxable income. Helen will be required to submit a valid ‘notice of intent to claim a tax deduction’ form.
The personal deductible contribution is subject to 15% contributions tax in the super fund, instead of her marginal tax rate of 34.5%. This results in a net tax saving of $3,900 (19.5% of $20,000). Helen also benefits by having her retirement savings grow in a low tax environment.
To discuss whether a Personal Deductible Contribution Strategy is appropriate for your circumstances, call Newcastle Financial Planning Good today on 4032 7934 to book a complimentary meeting with one of our specialist Financial Advisers.
- An additional 15% tax may apply to certain concessional contributions if your income plus concessional contributions exceed $250,000 in the 2017/18 financial year.
- Individuals can elect to withdraw up to 85% of their excess concessional contributions from their superannuation. Depending upon the amount effectively withdrawn, excess concessional contributions left in the super fund may also count towards the non-concessional contribution cap.
Disclaimer: This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives. This information is current at March 2018 but may be subject to change. The case study and effective tax rate are hypothetical and are not meant to illustrate the circumstances of any particular individual. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances and objectives. This information is our interpretation of the law and does not represent tax advice. Please see your tax adviser for advice taking into account your individual circumstances. RI/SCCPD/0618 RI Advice Group Pty Ltd | ABN 23 001 774 125 AFSL 238429