Your Tax Planning Guide to Minimise your Personal Tax
Now’s the time to review what strategies you can use to minimise your tax, before 30 June 2019!
Imagine what you could do with tax saved?
- Reduce your home loan
- Top up your super
- Have a holiday
- Deposit for an Investment Property
- Upgrade your Car
What you need to know about Superannuation?
You might not be flush with cash now and able to put excessive amounts into superannuation, but it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.
$25,000 is the Concessional Contribution Cap (CC) for everyone
The tax deductible super contribution limit (or “cap”) is $25,000 for all individuals under age 75. Individuals need to pass a work test if over age 65.
Consider making the maximum tax deductible super contribution this year before 30 June 2019.
The advantage of this strategy is that superannuation contributions are taxed between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.
Ordinarily, self-employed individuals and those who earn their income primarily from passive sources make super contributions close to the end of the financial year and claim a tax deduction.
However, this is the first financial year that individuals who are employees may also use this strategy. Individuals who may want to take advantage of this opportunity include those who:
- work for an employer who doesn’t permit salary sacrifice
- work for an employer who allows salary sacrifice, but it’s disadvantageous due to a reduction in entitlements, and
- are salary sacrificing but want to make a top-up contribution to utilise their full CC cap.
Spouse Superannuation Contributions
Since 1 July 2017, higher income thresholds apply for the spouse contributions tax offset.
You may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse, providing their income is $37,000 p.a or less (up from $10,800 p.a previously).
Additional Tax on Super Contributions by High Income Earners
The income threshold at which the additional 15% (Div. 293) tax is payable on super $250,000 p.a. Where you are required to pay this additional tax, making super contributions within the cap still a tax effective strategy.
With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare Levy).
Government Co-Contribution to your Super
If you’re on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to your super fund, you may be eligible for a Government co-contribution of up to $500.
In 2018/2019, the maximum co-contribution is available if you contribute $1,000 and earn $37,967 or less. This may reduce if you contribute less than $1,000 and/or earn between $37,697 and $52,697.
Contact us today to get advice specific to your circumstances.