Incentives available by boosting your Super

It’s that time of year again where there is a great opportunity to take stock of your estimated tax position and your superannuation position to see if there are some opportunities to boost your super and get some incentives from the tax-man.

This article covers three key types of superannuation contributions, concessional contribution, spouse contributions and co-contributions, and the incentives that are available for them (for the 2021/2022 financial year).

Concessional Contributions:

Making the most of concessional contributions can be a great way to boost your super and get a handy personal tax-deduction in the process.  It is a strategy we look at for most working clients and can be really effective in years where there are capital gains, redundancy and the like which will push the tax bill up.

Here’s some of the thing you need to know about making these types of contributions (which are called ‘concessional’ contributions across the board now):

  • The annual cap on concessional contributions in 2021/2022 is $27,500, prior to this year it was $25,000 per year.
  • Your Superannuation Guarantee (SG) contributions, the ones your employer makes on your behalf, and any salary sacrifice to super you’ve already made throughout the year, count towards this cap.
  • You no longer need to be self-employed to make these types of contributions.

Using ‘unused amounts’ from prior years:

  • If you’ve got unused amounts of your concessional cap from previous financial years (going back to 2018/2019) you may be able to bring these forward and use them, you have a 5 year rolling period to use them.
  • In order to make up these extra amounts, your super balance at 30 June 2021 has to be less than $500,000.
  • You need to be earning less than $250,000 in the year to get the low tax rate of 15 per cent on the contributions once they hit super, otherwise for those earning over this amount might pay 30%, which would still be considerably less than their marginal tax rate if you are earning at this level).

Don’t forget:

  • You should communicate with your fund or financial adviser to make sure you’ve followed the right process for the type of contribution you are making
  • If you don’t have an adviser, be sure to check your contributions history with your superfunds and also via your Mygov account under the ‘super’ tab.
  • You‘ll need to fill out the ATOs  paperwork to inform them you are intending to claim a tax deduction (prior to completing your tax return and within 12 months) for your contribution and you’ll need to include it in your tax return.
  • In the current financial year, you need to be under age 67, or between 67 to 74 and meet the work test (or work test exemption) before you can make a voluntary contribution to super.

Making spouse contributions to receive a tax offset 

You may be able to gain a tax offset of $540 by contributing $3000 to your Spouse’s super.

Here’s the fine print:

  • Receiving spouse’s income: to get the maximum benefit, the total of the receiving spouse’s assessable income, total reportable fringe benefits and reportable employer super contributions has to be $37,000 or less (it phases out when the income reaches $40,000).
  • Work & Age requirements: For 2021-22, the receiving spouse needs to meet the work test or work test exemption if aged between 67 and 74.  However from 2022-23, the receiving spouse no longer needs to meet the work test or work test exemption, they just need to be under age 75 (including 28 days after the end of the month in which the receiving spouse turns 75. 
  • Treatment in super: the contribution counts towards the receiving spouse’s non-concessional contribution cap and the tax-free component of their super.

Don’t miss out on the Government co-contribution

If you make a non-concessional contribution to super of atleast $1,000 you may be entitled to a government co-contribution of $500.

The fine print:

  • The maximum co-contribution of $500 will apply where your income is $41,112 or less and they make a non-concessional (personal after tax contribution) of at least $1,000.  The co-contribution will taper down your income is between $41,112 and $56,112.
  • Age: you need to be under 71 at the end of the current financial year and if over 67, they must meet the work test (or work test exemption) to be able to contribute.
    • You must have at least 10% of income attributable to employment activities (including self-employment).

It can be a lot to take in and a lot to get ‘right’ and it’s an area you really should do thorough research based on your personal situation, refer to the ATO website and/or seek the expertise of a financial adviser who can take into account your personal circumstances.  I’ve provided all this information for the purpose of educating you and it shouldn’t be considered personal advice as I don’t know or understand your personal circumstances.

Money Mode Advice Pty Ltd (ABN 29 627 492 791) is a corporate authorised representative of Integrity Financial Planners Pty Ltd (AFSL 225051, ABN 71 069 537 855)

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This presentation provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Renae Vercoe
Founder of Money Mode, financial professional, passionate educator, partner, mum and financial freedom fighter!