June 30 is quickly approaching, signalling the need to concentrate on superannuation. As a significant asset for many, the recent changes offer opportunities for strategic tax-saving moves.
Concessional Contributions:
The tax-deductible limit is increasing from $27,500 to $30,000 starting July 1. This change aligns with adjustments in tax rates.
For instance, if you earn $110,000 annually, a $27,500 tax deduction this year will save you $9,487 in tax and Medicare levy. However, the same deduction after June 30 will save you only $8,800. Clearly, if you have the funds available, it’s advantageous to make the concessional contribution before June 30.
Remember, the $27,500 limit includes employer contributions.
Catch-up Concessional Contributions:
These changes allow you to make contributions exceeding the $27,500 limit, which can be particularly effective in reducing capital gains tax. To utilize the catch-up contribution strategy, your super balance as of June 30, 2023, must be less than $500,000.
Only unused concessional contributions since the 2019 financial year can be applied, and any unused contributions from that financial year will expire on this coming June 30.
Employer Contribution:
The contribution rate will increase from 11 percent to 11.5 percent on July 1, boosting your superannuation balance in the long term. Take this opportunity to review your asset allocation to ensure it is not too conservative.
It’s also a good time to revisit any salary sacrifice arrangements into your super.
Non-Concessional Contributions:
These contributions come from after-tax dollars and are currently limited to $110,000 per year. This limit will increase to $120,000 on July 1. Therefore, someone with substantial funds who hasn’t been making any non-concessional contributions could contribute $110,000 before June 30 and then $360,000 in the next financial year.
You can also increase contributions by using the three-year bring-forward rule, allowing you to contribute $330,000 before June 30, provided your total super balance as of June 30, 2024, is under $1.68 million. If your super balance exceeds $1.9 million, no further non-concessional contributions are permitted.
Downsizer Contribution:
There are no changes but take a note to utilise the contribution amount to maximise your retirement benefits.
The maximum of $300,000 a person still applies, and you can make only one downsizer contribution in your lifetime.
For example, if you had $1.6 million in superannuation and made a $300,000 downsizer contribution you would have reached your $1.9 million limit, and you could not make any more non-concessional contributions. If you made a $300,000 non-concessional contribution first, however, you could still make the downsizer contribution
By staying informed and taking proactive steps, you can optimize your superannuation strategy and ensure you are making the most of the changes for the 2024/25 financial year
Credits
Sundaram Shanmugam
Smart SMSF Team
