The end of the financial year looms and that means the wealth window for 2021-22 is closing.
A bunch of allowances and opportunities will expire when the clock strikes midnight on June 30.
In fact, when it comes to the best concessionally taxed investment going – your super – the crucial date is Monday, June 27.
That’s the last day to make a Bpay into your super.
So, what are you actually allowed to put in and how? Because it might surprise you just how much opportunity there is to shelter money in this tax haven.
Read more from Nicole Pedersen-McKinnon:
And it may come as more exciting – and urgent – news that doing so could dramatically cut your tax bill this year.
Here are three super strategies to use before it’s too late.
Super strategy one: Spouse contribution
Families where one spouse is earning far less, possibly because they are caring for young children, have an excellent and expiring opportunity to make up the ‘super’ cost of kids.
It’s called the spouse contribution.
The higher earning spouse makes an after-tax contribution of up to $3,000 into the super account of the lower earning spouse.
Provided that low-earning spouse is on less than $40,000 a year, the payer will get an up-to $540 tax offset. So an actual discount of this amount off the top of their tax bill.
That means there’s instantly more money for the family sitting in the super tax shelter… and there’s instantly more back in tax.
Don’t forget the June 27 deadline for transfer.
Super strategy two: Concessional contributions
This one is again relevant where you may not have been able to make many super contributions in the past few years… perhaps because you are in the thick of child rearing. Or perhaps the pandemic wiped out your earning power for a while.
The difficulty has always been that it is strictly limited how much you can pay into super in any given year - this limit for before-tax contributions (or contributions for which you claim a tax deduction) was $25,000 until it went up to $27,500 this tax year.
While those limits might seem high at first glance, they include superannuation guarantee contributions from your employer (note the requirement is going up to 10.5 per cent from July 1), any salary sacrifice contributions that you make and any voluntary additional ones for which you claim tax deductions.
But if you don’t use it, you lose it.
Or you used to.
The introduction of the so-called carry-forward rule several years ago means that you can ‘mop up’ unused super limits.
You will be able to do this for the past five years, rolling, after which your allowances will expire for good.
But this facility started from the 2019 tax year, so at the moment you can top up the three past years and this tax year.
That gives you $102,500 that you can shelter in super before June 27. You must have had a super balance under $500,000 on June 30 the previous tax year, to be eligible.
Okay, you know the long-term benefits, especially for someone who was previously unable to use up their contribution annual caps and whose super is therefore suffering, but what do you stand to gain in the short-term?
Well, it’s crucial to investigate such a move if you are facing a capital gains tax bill. This type of ‘concessional’ contribution lowers your assessable income and therefore your tax bill.
It is particularly powerful if the deduction drops you down to a lower marginal tax rate.
Super strategy three: Non-concessional contributions
In a similar vein, with just a little knowledge you can dramatically up your allowable after-tax, or non-concessional contributions as well.
These contributions are capped at $110,000 annually but, once more, there’s a multi-year opportunity… this time to use three years of future allowances.
Called bring-forward rules, they let you pay up to $330,000 in one year from after-tax personal funds into your super account.
This tax year, you need to have been under age 67 at some point to use the bring-forward rules.
From July 1 2022, you can be as old as 75 (with no work test applying).
While this doesn’t give you additional tax perks, it is a great strategy to boost your super in the run up to retirement and/or if you’ve recently received an inheritance or sold a large asset. There will be far more money in your ‘fun fund’, growing in a tax-advantaged environment.
Just how tax advantaged?
Super tax perks
Besides securing a sweet retirement for yourself, the delicious tax perks you enjoy within super are:
Only 15 per cent tax on the way in (it is nothing on after-tax contributions as you have already paid tax)
Investment earnings taxed at only 15 per cent in the fund
No tax (usually) when you withdraw the money.
It is a bonafide tax haven… and can be a way to snare an immediate tax break too.