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& My money

Voluntary super contributions may help reduce your tax bill

Man looking at ipad to manage super

Last year's superannuation reforms have opened up a valuable new opportunity to build wealth in super and reduce your tax bill at the same time.

It’s now easier to claim a tax deduction on your personal super contributions than ever before.

Before 1 July 2017, the only way most people could take advantage of the concessional (before-tax) contributions tax benefits was by salary sacrificing through their employer. If you were self-employed, you could make voluntary personal contributions to super and claim a tax deduction but, most people were simply ineligible.

Remember, concessional contributions are contributions you can make to super either with your before-tax salary or by claiming a tax deduction on after-tax contributions. Either way, for most people, concessional contributions are taxed at just 15 per cent - not your marginal tax rate which could be as high as 47 per cent.

Even if you did make super contributions through salary sacrifice, as an employee you rarely had control over when your salary sacrificed contributions were made by your employer.

Now, anyone, not just the self-employed, can make voluntary personal contributions to super and claim a tax deduction.

This gives you more flexibility if your employer isn’t in a position to arrange salary sacrifice for you — such as a small business owner who doesn’t have the time to provide this service to their employees.

This gives you that control so, for instance, you can time your final contributions leading up to 30 June each year and make the most of your contribution limits and the resulting tax benefits.

Getting started

To claim a tax deduction on your super contributions make sure you:

  • Check the age restrictions to make sure you’re eligible. There is a work test if you are aged 65 to 75 (to confirm you are working).
  • Lodge a ‘notice of intent to claim a deduction’ to your super fund within the timeframes.

This change represents an opportunity for everyone, including those who are currently salary sacrificing, to gain greater control of their personal super contributions.

If you’d like to find out more about making additional super contributions, talk to a P&N financial planner.

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