You’ve already probably heard this before that making additional superannuation contributions reduces your tax but what and how does it work?
Remember that saying – “hindsight is a wonderful thing” but just for once that hindsight is bought to you as a powerful and money saving (hence money making) insight.
If used wisely making the most of your superannuation contributions will be your best investment for tax purposes. Take the time and advice now because you seriously don’t want to be kicking yourself in the future.
Why are you putting it off?
- Unfortunately, we’ve become a society of instant gratification. If we can’t have it right now, within seconds we refuse to see future benefits. That’s not only sad; it’s lazy.
- “I’ll just focus on what’s in front of me in my business right now, right here because I just don’t have the head space or mind capacity to think too far into the future”. How is this way of thinking giving you your preferred lifestyle now and into the future? It’s just not a sustainable way of thinking.
- “One minute the law says this, then it changes all over again – I just can’t keep up”. The most successful people in the world keep up or have a team of people who keep up for them ensuring they are always one step ahead of the game.
Here are just a few examples of how your super becomes even better:
- Accumulating a balance on earnings on your superannuation? Pay 15% tax that will save (and make) you more money.
- Did you know you can use your superannuation to help you buy your business premises even if you don’t have the whole amount?
- With some conditions and if you’re over 55 years of age, you only have to pay 0% tax on earnings if you’re already drawing on a pension. Yes, 0%.
Now for the number crunching to further convince you tax planning strategy works and will increase your wealth.
Say you currently have a taxable income of $200,000.
Scenario 1 without any tax planning looks pretty painful because if you are paying tax at an individual rate you’re up for a rate of up to 47%. So that equates to $67,547 in tax owed and paid for by you. Unlike a plaster; the quicker you rip it off doesn’t make it hurt any less.
Now take a look at scenario 2, with smart tax planning, when you contribute $22,000 of that to Super before 30th June.
Your taxable amount immediately decreases to $178,000. That means in an instant your tax obligations reduce by $7,040.00. That’s not to be sniffed at and that’s what happens with smart tax planning that takes it out of your own name and places it nice and safely back into your Superannuation.
How can you do this we hear you eagerly cry?
- You need a business
- You need cash to deposit into your Superannuation
- You need to do all this before 30th
A few more tips and advice to share:
- You only pay 15% tax in Super for any contributions and tax deduction claims
- The 15% gets paid by your super fund once your tax return is filed if you have SMSF or is taken out of your balance when you deposit if from a public super.
- The limit if you are 48 years old or younger is $30,000 and $35,000 (through to June 30 2017), then proposed $25,000 as proposed by the new budget, if you’re 49 years and over.
- If you’re making contributions after tax, then the limit increases a lot up to $500,000 (as per the new changes in the budget)
- You have to have the cashflow before June 30 each year so it pays to plan so you don’t miss out
- Each Super limit applies per person