Superannuation Tax Planning Opportunities

CONCESSIONAL CONTRIBUTION CAP OF $27,500 FOR EVERYONE

The tax-deductible superannuation contribution limit or cap is $27,500 for all individuals regardless of their age  for the 2023/24 financial year.  This will be increased to $30,000 from the 1st July 2024.

If eligible and appropriate, consider making the most of your 2023/24 financial year annual concessional contributions cap with a concessional contribution. Note that other contributions such as employer Superannuation Guarantee Contributions (SGC) and salary sacrifice contributions will have already used up part of your concessional contributions cap.

CARRY FORWARD CONCESSIONAL CONTRIBUTIONS

If your total superannuation balance as at June 30, 2023 was less than $500,000 you may be in a position to carry-forward unused concessional caps for up to 5 years.

Members can access their unused concessional contributions caps on a rolling basis for five years and amounts carried forward that have not been used after five years will expire.

The advantage of making the maximum tax-deductible superannuation contribution before June 30, 2024  is that superannuation contributions are taxed at between 15% and 30%, compared to personal tax rates of between 32.5% and 45% (plus 2% Medicare levy) for an individual taxpayer earning over $45,000.

Typically, self-employed individuals and those who earn their income primarily from passive sources like investments make their super contributions close to the end of the financial year to claim a tax deduction. However, individuals who are employees may also use this strategy and those who might want to take advantage of this opportunity.

 NON -CONCESSIONAL SUPER CONTRIBUTIONS

If eligible and appropriate, consider utilising all or part of your 2023/24  financial year annual non-concessional contributions cap by making a non-concessional contribution for up to $110,000 for the 2024 financial year.   This will be increased to $120,000 from 1 July 2024.

If you are not currently in a non-concessional contributions bring forward period, consider whether you may be in a position to ‘bring-forward’ your non-concessional contributions caps for the 2024/25 and 2025/26 financial years. Please speak to us if you are considering this.

GOVERNMENT CO-CONTRIBUTION TO YOUR SUPERANNUATION

The Government co-contribution is designed to boost the superannuation savings of low and middle-income earners who earn at least 10% of their income from employment or running a business. If your income is within the thresholds listed in the table below and you make a ‘non-concessional contribution’ to your superannuation, you may be eligible for a Government co-contribution of up to $500.

To be eligible you must be under 71 years of age as at June 30, 2024. In 2023/24, the maximum co-contribution is available if you contribute $1,000 and earn $43,445 or less.  A lower amount may be received if you contribute less than $1,000 and/or earn between $42,016 and $57,016. 

The matching rate is 50% of your contribution and additional eligibility  include:having a total superannuation balance of less than $1.9 million on 30 June of the year before the year the contributions are being made having not exceeded your non-concessional contributions cap in the relevant financial year

 TRANSITION TO RETIREMENT

If you don’t want to fully retire and would like to reduce your working hours you can take advantage of what is knows as “Transition to Retirement" TTR. This means that providing you have reached your preservation age you can elect to keep working full time or part- time and take money out of your super to supplement your income. This is popular for those who want to scale down their working hours rather than retiring.

Date of Birth                                          Preservation Age

Before 1 July 1960                                              55
1 July1960 - 30 June 1961                             56
1 July 1961 - 30 June 1962                            57
1 July 1962 - 30 June 1963                            58
1 July 1963 - 30 June 1964                            59
1 July 1964 - 30 June 1965                            60

When you are receiving a TRT pension  you can still work and claim a tax deduction for concessional  contributions into super currently $27,500 for the 2024 financial year, and then increasing  to $30,000 from the 1st July 2024..

If you decide to implement a TTR strategy,  you must withdraw a minimum amount  currently 4% for someone aged 60 (based on age) from your superannuation account balance up to a maximum of 10%. .

If you are under 60 any amount you withdraw will be subject to tax at your marginal rate of tax . You will also be entitled to receive a tax rebate of 15%. After the age of 60, the good news is that any amount you withdraw is TAX FREE!

Case Study 1 : Sue reduces her work hours

Sue just turned 60 and  earns $50,000 a year before tax. She decides to ease into retirement by reducing her work to three days a week. This means her income will decrease  to $30,000.  Sue transfers $155,00, of her super to a transition to retirement pension and withdraws $9,000 each year, tax-free. This replaces some of her lost pay.

Case Study 2: Bill reduces his tax

Bill  is 60 and earns $100,000 a year. He intends to keep working full-time for at least another five years. Bill  transfers $200,000 from his super to an account-based pension so he can start a TTR strategy,

He salary sacrifices into his super. This will reduce his income tax, but also his take-home pay. He tops up his income by withdrawing up to 10% of his TTR pension balance each year.

As you can see the TRT strategy is very useful for people wanting to scale down their work and supplement their income by drawing from superannuation.  To make sure, it's the right strategy for you, please contact us.

ACCOUNTS BASED PENSIONS  

If you are aged 60 + and retired or 65+ and still working , I have good news for you. There are significant tax advantages in taking an Accountants Based  Pension from your super. Not only are the withdrawals you make  tax- free,  but also the earnings within your superannuation fund are tax-free to 1.9 million dollars. 

 Although  you must withdraw minimum amount must be paid each year for pensions as per the table below, there  are  no limits on the amount you can withdraw.

The minimum amount for ages: 

Under  65 is 4%
 65 to 74 is 5%
 75 to 79 is 6%
 80 to 84 is 7%

To put in place an accounts based pension, you will need to speak to your superannuation fund provider. If you have a SMSF, then please  speak with us

SELF-MANAGED SUPERANNUATION

A Self-Managed Superannuation Fund (SMSF) can provide significant tax savings but they don’t suit everyone. There are significant regulations surrounding the management and administration of SMSF’s. With the end of the financial year approaching, now is a good time to discuss the pros and cons of establishing your own SMSF. It might be appropriate to establish a SMSF in conjunction with other tax planning opportunities. If you would like more information about self managed superannuation funds  we invite you to consult with us today

Other 2024 Year End Tax Planning Opportunities

• Back to the overview of the 2024 Year End Tax Planning Guide
• Round Up of Other Year End Tax Issues
• Immediate Write-Off For Individual Small Business Assets & Temporary Full Expensing
• Key Tax Minimisation Strategies
• Superannuation Tax Planning Opportunities

Disclaimer: This newsletter contains general information only and no responsibility can be accepted for errors, omissions or possible misleading statements. It is not designed to be a substitute for professional advice and does not take into account your individual circumstances. Therefore, no responsibility can be accepted for any action taken as a result of any information contained in this newsletter.