With the end of the financial year approaching, there are a few tips you may wish to consider to boost your super whilst receiving some associated tax breaks.
The spouse super tax offset enables higher earning taxpayers to make a super contribution for their non-working or low income spouse. At the same time, you will be eligible for a tax offset. Your spouse’s income must be $37,000 or less to qualify for the maximum offset of $540. The offset then reduces gradually to completely phase out at $40,000.
Low to middle income earners can receive a government co-contribution of up to $500. To receive a co-contribution you must have made one or more eligible personal super contributions during the financial year, be less than 71 years old at 30 June, not hold a temporary visa at any time during the financial year (unless you are a NZ citizen or it was a prescribed visa) and you must lodge your tax return for the relevant financial year.
Additionally, you must pass two income tests.
If your total income is equal to or less than the lower threshold ($36,813 for 2017/18) and you make personal contributions of $1,000 to your super account, you can receive the $500 contribution.
If your total income is between the lower threshold and the higher threshold ($51,813 for 2017/18), your maximum entitlement will reduce as your income rises.
Also, 10% or more of your total income must come from employment-related activities, carrying on a business, or both.
If you have the ability, you may wish to consider taking full advantage of the contribution caps.
Concessional (before-tax) contributions include employer contributions, salary sacrifice and personal contributions you claim as a personal super contribution deduction. The concessional contributions cap is $25,000 for the year ended 30 June 2018.
The non-concessional (after-tax) contributions cap is $100,000 per year. If you are between 65 and 74 years old, you can only access this cap if you meet the work test. Also, if you have a total super balance greater than or equal to the general transfer balance cap of $1.6 million at 30 June 2017, your non-concessional cap is reduced to nil.
For various reasons some employers do not offer salary sacrificing arrangements to their employees even though they still make the 9.5% superannuation guarantee payments. Also, some people do not wish to commit to regular salary sacrifice payments, preferring to pay tax on their income and save it outside of their superannuation.
You can take some of your savings on which you have already paid tax and make a voluntary contribution into your super. (The $25K cap still applies.) You can then claim a deduction in your tax return for the additional contribution.
To claim a deduction in your tax return you must send a notice of intent to do so to your super fund and receive an acknowledgement from them prior to lodging your tax return.
If you would like to discuss maximising your super before 30 June, please call us.