There has been some big changes to superannuation recently and whilst most of these changes won’t impact the average Australian, there is one change that we all should be aware of.
It has long been a sore point for some time that clients can get into trouble due to their employer’s not paying their superannuation. Or their employer ends up paying all a client’s super in one year, so the client ends up getting taxed on the extra contributions.
From 1 July 2017 the playing field has been levelled, and you will now have some control over this, such that anyone who is eligible to make a concessional contribution up to $25,000 a year can claim a tax deduction in their tax return. To be eligible you must be under 65 or for those between 65 and 75 you must pass the work test, which unfortunately hasn’t been removed.
Salary sacrifice will still be allowed, it just won’t be necessary. Just remember that the maximum limit of $25,000 includes your employer 9.5% contributions, so if you earn $60,000 and your employer has contributed $5,700, then that means you can personally contribute up to $19,300.
What is the benefit?
This is best illustrated by way of an example. Continuing on with the above example, you have taxable income of $60,000, and make a concessional contribution of $15,000. You will lose $2,250, as super funds are taxed at 15%, but will still have $12,750 working for you in the fund, with earnings only taxed within the fund at the low rate of 15%. Better yet, you can get a tax deduction of $15,000, bringing your taxable income down to $45,000, which equates to a potential refund of $5,175. This strategy effectively turns your $15,000 into $17,925, which is a return of 20%. Wow!
If any of the above affect you and your need assistance or you have any questions on the changes please feel free to contact Melanie or Renee.
General Advice Warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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