The government wants to give a carrot 🥕 to people who work past age 60 but does not want it to be too simple or too many people would use it. It is available for those who look for that sort of thing but not so much for people who are disengaged or do not have a financial adviser to support them through the maze.

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We are here to support you with this and any other financial matter.

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Some more details:​

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Currently everyone who is under 67 can make tax deductible personal contributions to super and, with some extra rules, those between 67 and 75 as well.

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That is a huge government concession. You make a tax deductible payment to your super fund, i.e. you still own the money, but you also get the tax deduction. The super fund pays 15% tax on your contribution if you earn less than $250,000 and, depending on your income, that is either useless (because you don’t pay tax anyway) or valuable (you earn over $45,000 and under $190,000) or very valuable if you earn between $190,000 and $250,000.

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There are less favourable rules for those who earn over $250,000, best to talk to me so we can look into your specific circumstance.

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Super contributions can also be a great way to reduce the tax payable if you made a good capital gain and are looking at a much higher tax bill than normal.

 

​How valuable this government concession is also depends on your age and how much spare money you have. The closer you are to age 60 or age 65 the quicker you can have access to the contributions you just made into super. This can be accelerated if you are younger and your spouse is closer to age 60 or 65 but not over 65, as you can move your contributions, once they are in the super fund, over to your spouse and benefit from their earlier access.

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If the above sounds like Dutch backward to you 🙃, I am more than happy to explain. It is often much easier to understand when we look at your personal situation.

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In any case, what are the mechanics of making successful contributions?

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If a person makes a personal super contribution, this contribution is either tax deductible or it is not tax deductible.

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For example a person earning $120,000 in a year in taxable income who makes a tax deductible super contribution of $10,000, reduces their taxable income to $110,000. If they make a non-deductible (non-concessional) contribution, then their taxable income remains at $120,000.

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The super fund won’t know what the $10,000 are – tax deductible or not – and normally assumes that the contribution is not tax deductible. To make sure that the contribution is tax deductible the person making the contribution needs to give a ‘Notice of intent to claim a tax deduction’ to the super fund. That is a form that is provided by most super funds on their website which we can also provide to our clients and support them through the submission.

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Once the super fund receives that form, they will then deduct 15% contribution tax from the contribution and forward the tax to the government. Your superfund will acknowledge receiving your Notice of Intent to you in writing. That written acknowledgement is something you can take to your accountant to claim a tax deduction, reduce your taxable income and pay less tax.

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If, as in the above example, your income is around $110,000-$120,000, then your marginal tax rate is 32% including the Medicare Levy. Your tax saving on a $10,000 contribution would be 32% minus 15% = 17%. That is, a saving of $1,700.

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Important: Never make any of the following changes before your Notice of Intent has been acknowledged in writing by your super fund:

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• Take any money out of super.

• Move super money to your spouse (contribution splitting).

• Start a transition to retirement or allocated (tax free) pension.

• Roll any of your super over to a new fund, whether it is to pay insurance premiums or whether it is to move to another super fund.

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Why? The reason is that the super fund can’t take all of or in many cases any of the tax out after any of the above has happened and you will not get a tax deduction for yourself in those cases.

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Below is the official wording as to what the conditions are for you to receive a tax deduction after you have deposited the funds. Apart from the obvious conditions you have to be careful not to take money out or move your super around before you have received the acknowledgment of your Notice of Intent from your super fund. After you received your acknowledgment you can do whatever you need to or want to do with your super.