Ishara Rupasinghe* says it’s not too late for PS employees and contractors to boost their super account and save some tax before the end of this financial year.
With less than a week to go until the end of the financial year, don’t fall into the trap of thinking it’s too late to do something to help improve your finances.
Whether you’re a Public Servant or a contractor, here are some tips to help boost super and save tax before 30 June.
Because super accounts can be opened online — generating an account number immediately — you may still be able to get that all-important last-minute contribution into super and reap the benefits.
When the biggest reforms to super in a decade took effect from 1 July 2017, PS employees were also caught up in the changes.
But, the changes were not all negative.
In some ways, there is now more flexibility allowing people to better manage their super contributions.
Here’s why:
The big change is that you can now make a tax-deductible contribution to super — right up until the last week of the financial year (but check with your super fund when their cut-off for contributions is).
Previously, the only way PS employees could make this special type of “concessional” contribution was to set up in advance a fortnightly salary sacrifice through their payroll office.
This new rule means whether you’re a PS employee or a self-employed contractor, you can maximise your pre-tax contributions each year by “topping up” any employer Super Guarantee (SG) contributions or salary sacrifice contributions made during the year.
You will need to send an “intent to claim deduction” form to your super fund so they give the correct information to the Australian Taxation Office (ATO), but it may be worth the effort — making that last-minute tax-deductible contribution to super could save as much as $8,000 in tax!
Remember, the $25,000 cap also counts employer SG contributions, so check carefully how much room you have left before putting in more.
If you’re contributing to the CSS and PSS, more of your employer contributions now count towards the $25,000 cap.
However, you may be surprised to know you still have room to make some contributions.
For example, if you’re a PSS member with a $120,000 super salary, $10,235 of your employer’s contributions count towards the cap, which means you could make a further $14,765 in concessional contributions to a different super fund.
On the other hand, if you’re a CSS member on $120,000, $17,580 of your employer’s contributions count, so you could still make $7,420 in concessional contributions.
This strategy may be a very helpful way to boost your super and lower your annual tax bill.
First home buyers can also add to their super fund before 30 June and get a tax benefit to help with the deposit.
This strategy is particularly attractive if you’re buying within six to 18 months, as by making the maximum contributions before 30 June and again in July, you could receive around $5,000 in tax benefits (or about $10,000 as a couple) — a decent bonus towards a deposit.
With such a short investment time frame, make sure you check the eligibility criteria and direct contributions into a cash-only investment option within your super fund.
If you’re part of a couple and working part-time or have some unpaid leave, keeping both super accounts growing evenly can be a challenge.
If you earned less than $40,000 this financial year and your spouse makes a $3,000 spouse contribution to your super fund, they could be entitled to a tax offset of up to $540.
The level of offset reduces as you get closer to the $40,000 threshold, but it can be a great incentive to boost your household super.
If cash flow is short, another option for couples is splitting the contributions your spouse’s employer has made to your super account — which is only available for non-defined benefit accounts.
But requests for this need to be done prior to 30 June this year.
Check what fees apply with your super fund and if you’re much younger than your spouse, keep in mind these contributions may be locked inside super for longer.
Lower income earners who can afford to make a $1,000 personal contribution to super can also benefit from a Government co-contribution payment of up to $500.
Check your income levels because the Government payment gets smaller the higher your total income is, and cuts out completely when you reach $51,813.
High income earners who plan to retire by 30 June and expect a healthy defined benefit pension may need to make their final contributions to super before 30 June.
That’s because you are not able to make non-concessional contributions if your super balance exceeds $1.6 million.
Given the fact that once you claim your defined benefit pension the ATO will multiply the annual pension by 16 to calculate its assessed value, if you wait, you might not be able to add more money to super.
Last, make sure you have cash in the right account to cover any last-minute super contributions, pre-payments of interest or pension payments.
It sounds simple, but all too often people forget they have limits on their internet banking — resulting in additional bank fees to make urgent transfers, overdrawn account fees or worse.
If the deadline is completely missed, the tax benefits from this financial year will be lost.
This is general financial advice only.
* Ishara Rupasinghe is Director of Family Wealth Management at Dixon Advisory & Superannuation Services Limited.
