Everyone likes a tax refund from the tax office. A way to obtain a refund and increase your savings for retirement is to make a catch-up contribution to your superannuation fund and claim it as a personal deductible contribution. If you have less than $500,000 in super and have not been maximising your concessional contributions in the previously years, you could have an opportunity to benefit from this strategy.
Take Joe. He looked in his MyGov, on the ATO site, and saw he could make a catch up contribution of $30,000. He has just received a bonus and thought he would contribute $10,000 to his super. As Joe’s income is $160,000, his marginal tax rate is 39% with medicare levy. So after submitting the appropriate paperwork Joe will receive a refund of $3,900 after he lodges his next tax return and his super will be increased. Definitely a win- win!
For Mei she has recently sold an investment property. She has a net capital gain of $80,000 which when combined with her salary of $120,000 meant she will be paying tax on $200,000 of income. Part of this tax is at 47% including Medicare levy. Fortunately she has a catch up concessional contribution opportunity of $50,000 so is able to reduce her assessable income to $150,000, thereby reducing her personal tax due by $21,100. She will be taxed at 15% on the $50,000 contribution to super, resulting in her overall tax saving in that year being $13,600.
Making catch-up concessional contributions is a great way to reduce tax and increase your super. So why not ask your BYRONS trusted advisor today about speaking with someone from our wealth advice team to see if this strategy could help you.
Disclaimer: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.