The constant changes to superannuation can be frustrating to many as they find it difficult to maintain their confidence in the superannuation industry. Many have chosen to put the bare minimum into superannuation with their preference to build for their nest egg outside superannuation where they have full control and access without impact from the changes to superannuation. However, is superannuation still a worthwhile consideration?
Currently, compared to other tax structures available, such as companies, trusts and partnerships, and personal tax, superannuation is still one the best tax structures available for many and should not be discounted. All income in superannuation is taxed at a fixed rate of 15% and capital gains can be taxed as low as 10%. If you commence receiving a pension for superannuation then all the income and capitals gains will be taxed at 0% up to the $1.6 million cap.
So are you taking full advantage of the changes to superannuation available to you? Due to the many changes, it can be easy to overlook what you may be eligible for and what may impact you. Below are some things that may be relevant to you:
- Tax Deduction for personal contributions – You may claim a tax deduction for personal contributions up to the concessional contributions cap of $25,000. Note, if you aged between 65-75 years you will need to meet a work test in order to claim a tax deduction.
- Super Co-contribution – you may be eligible for a co-contribution of $500 if your total income is less than $37,697 and you make personal contribution of $1000 to your super. If your income exceeds $37,697 but is below $52,697, you will receive a reduced co-contribution.
- Low Income Superannuation Tax Offset – a tax offset up a maximum of $500 is available to individuals with an adjusted taxable income of $37,000 or less. As long as your fund has received and reported a concessional contribution and you have lodged your tax return, the ATO will pay this directly to your superannuation account.
- Low Income Spouse Tax Offset – a tax offset up to a maximum of $540 is available to individuals who make personal contributions to super on behalf of their spouse and their spouse’s income (including fringe benefits and reportable employer super contributions) is $37,000 or less. Where the spouse’s income is $40,000 or less but exceeds $37,000, a reduced tax offset is available.
- Downsizer contributions – if you are aged 65 years or over and have sold your personal home, you may be eligible to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home.
- Rolling 5 year concessional contributions – If you have a super balance of less than $500,000, you can make additional catch-up concessional contributions if you have not reached your concessional contributions cap in previous years. This applies from 1 July 2018.
- Division 293 tax – high income earners pay an additional tax if their income exceeds $250,000. Income for the purposes of Division 293 tax includes taxable income, reportable fringe benefits, net financial investment/rental property loss, net amount of which family trust distribution tax has been paid, super lump taxed elements with zero tax rate.
If you have the long term goal to build for wealth and your retirement, superannuation should be considered as part of your financial plan.
If you would like further information on how to do this or would like to discuss a self-managed superannuation fund, please contact our team.
Helen Yau – Accountant Manager & Financial Planner
CA, BComm, Dip FP, SSA