Although it’s already April, it’s not quite the end of financial year yet, but that doesn’t mean you can’t start planning your tax and thinking about catch up contributions.
If your super balance is under $500,000 (which is a reality for many Australians), there are ways you can reduce your tax. This strategy is otherwise known as increasing your superannuation contributions.
Want to know more about tax planning and catch up contributions?
Read more from your trusted team of Gold Coast Accountants and Financial Planners at Crest to find out how to achieve smarter tax planning.
Defining catch up concessional contributions to super
Did you know for up to five years in the future, you can use any unused concessional contribution cap amount in a single financial year? This is provided that your total super balance is under $500,000 at the end of the previous financial year.
These provisions were introduced in the 2018/2019 financial year.
To summarise, these tax planning strategies will:
- Boost your super balance, and
- Lower the amount of tax that you need to pay.
It’s always a wise idea to utilise tax planning and super boosting strategies.
After all, the planning you put in now, will be so beneficial for your future retirement finances.
What are concessional contributions?
A concessional super contribution is defined as any contribution that is made from your pre-tax income. Taxed at just 15%, this is even lower than the marginal tax rate in Australia.
Here are some examples of concessional contributions:
- Compulsory super payments made by your employer on your behalf (otherwise known as the superannuation guarantee contribution),
- Personal contributions that you then claim as a tax deduction, and
- Any salary sacrifice agreements in which your employer pays an additional amount of your pre-tax salary (or wages) into your super.
Talk to the team at Crest, who provide both professional accounting and financial planning advice for tailored solutions to suit you.
Is there a cap on concessional contributions?
Yes, there is a cap (or maximum) of concessional contributions you can make to your super in any one financial year. Currently, the cap sits at $25,000.
What happens if you go over the cap?
The excess of concessional contributions to your super over $25,000 in a single financial year will likely be taxed at the marginal rate, less a 15% rebate on tax already paid when your contribution entered your super fund.
Yet, there exists what’s called a ‘catch up concessional contribution.’
Read more to find out what this entails…
Full-service accounting and financial planning advice with Crest
For over 45 years, Crest have helped individuals and business owners with accounting advice.
Don’t worry if you don’t know where to start.
Let us help you understand and apply the best tax and financial planning strategies for you.
Contact Crest Accountants today for smart, simplified and straightforward tax planning.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.