End of Financial Year Superannuation Reminders

With End of Financial Year (EOFY) fast approaching, it’s important to reflect on the different ways you can add to Superannuation to take advantage of the tax benefits available.

So how can you add to Superannuation? We explain below.

Please be mindful, with any financial strategy the devil is in the detail.  We have highlighted some high level ideas to whet your appetite. For the purposes of keeping it simple we have not covered all eligibility criteria in this article.  It’s worth reaching out to your adviser to see how they apply to you.

Concessional Contributions

Concessional contributions refer to pre-tax contributions made to your superannuation account each financial year. These contributions are typically made up of:

• Employer contributions (such as Superannuation Guarantee payments).
• Salary sacrifice contributions.
• Lump sum personal contributions for which you can claim a tax deduction.

For the 2023-2024 financial year, the concessional contribution cap is $27,500, increasing to $30,000 from 1 July 2024. Contributions within this cap are taxed at a concessional rate of 15%, which is generally lower than most individuals’ marginal tax rates. As a result, there is a distinct tax benefit for most working Australians to add to Super via this method. 

However, from 1 July the personal marginal tax bracket for those earning between $18,201-$45,000 will change to 16%. This makes it far less attractive for income earners below $45,000 to make concessional contributions.

If you exceed the concessional contribution cap, the excess amount will be taxed at your marginal tax rate, with an additional excess concessional contributions charge.

Want to add more than the annual cap? There may be capacity under the carry-forward provision.

Concessional Carry-forward provision

In the 2018-19 financial year, the Government enacted new legislation that allows individuals who have less than $500,000 inside Superannuation to ‘carry forward’ any unused portion of their annual Concessional Contribution cap.  The carry forward provision includes unused cap space extending back 5 years from the current financial year.

Using the carry-forward contribution rules can be beneficial when:

• You wish to boost your superannuation in the lead-up to retirement.
• You have realised a large capital gain and wish to make a significant tax-deductible contribution.
• Your taxable income is above $45,000 and you wish to reduce your income tax liability.

You should consider the restrictions that apply to accessing your super when assessing this strategy. If the above criteria apply to you, and you’re on the cusp of retirement, or already retired, there could be material tax savings to consider. If you think the Carry-forward provision could benefit you, please contact our office to discuss this strategy in more detail.

Government Co-Contribution

If you are working and have taxable income under $43,445 then you can make a $1,000 after-tax (non-concessional) contribution to your super account and the Government will automatically credit your account with $500.

The benefit is scaled down until your taxable income reaches $58,445 where no co-contribution is payable.  There are quite a few other eligibility criteria and we recommend you read the ATO article here or speak to your adviser.

Spouse contribution

You can take up to $3,000 from any of your bank accounts and contribute it to super in your spouse’s name.  They will be thrilled with an increased super balance, and you will get a tax offset representing 18% of your contribution, up to a maximum $540.  It’s important to bear in mind your spouse’s income needs to be under $37,000 for you to get the full benefit and under $40,000 to get any benefit at all.

Again, these are basic rules, however there are more eligibility criteria to consider before before committing to a spouse contribution.

Contact Muirfield Financial Services

Feel free to implement any of these contribution strategies yourself, however, be warned, we’ve only provided some of the high level eligibility criteria.

Alternatively, we can help review your financial situation and help you optimise your position when it comes to saving tax with your super.