The end of the financial year is fast approaching – and this year, there’s a new way to help you save on tax while boosting your super. By making an after-tax contribution to your superannuation before the end of the financial year, you could boost your retirement savings for the future – and claim a tax deduction now. In the past, this strategy was only available to the self-employed and those earning less than 10% of their income as an employee. But since 1 July 2017, this strategy is also available to employees.

Here’s what you need to know:

Benefit today – and tomorrow

If you make super contributions from your after-tax income or savings, you may be able to claim them as a tax deduction and reduce your taxable income, while boosting your super. The contribution will then be taxed in your super fund, generally at the concessional rate of up to 15% (or up to 30% for higher income earners). This is instead of paying tax at your marginal tax rate, which could be up to 47% (including the Medicare levy).Depending on your circumstances, this strategy could result in a tax saving of up to 32% – and help you retire with more.

Here’s an example:

Bob is 55 years of age and earns $80,000 pa, so his marginal tax rate is 34.5% (including the Medicare levy). He’s paid off his mortgage and plans to retire in 10 years – so he wants to contribute more to his super.

He makes a personal super contribution of $10,000 and claims the amount as a tax deduction – reducing his taxable income. This means he pays $3,450 less tax in his tax return.

Meanwhile, tax of 15% ($1,500) is deducted from the contribution in the fund.

So, by using this strategy, Bob increases his super balance and makes a net tax saving of $1,950 (that is, $3,450 less the $1,500 tax he paid within his super fund).

Am I eligible?

To make a personal deductible contribution to super, you need to be under the age of 65, or between 65 and 74, and have worked at least 40 hours over 30 consecutive days in the financial year you make the contribution.

How do I claim my deduction?

To claim the super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form with your super fund, and receive an acknowledgement from them, before you complete your tax return, start a pension or withdraw or rollover the money.

Remember the cap

Remember, if you claim personal super contributions as a tax deduction, they count towards your concessional contribution cap, which is $25,000 in the 2017/18 financial year. It’s important you don’t exceed the cap, as penalties may apply.

All employer contributions (including superannuation guarantee and salary sacrifice) and certain other amounts are also counted towards this cap.

Need advice?

If you’re thinking about investing more in super, we can help you decide whether making a personal deductible contribution is right for you. We can also help you assess all your options that may help build a healthy retirement nest-egg.

Disclaimer

This information is current as at 30/04/18.

This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.