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Special edition:
2022 EOFY
Tax Planning Essentials

As we approach the end of the financial year it’s a good time to review strategies to improve your tax position and plan for your retirement simultaneously.

Government co-contribution

If your taxable income for the 2021-22 financial year is less than $42,016, then you can contribute up to $1,000 as a non-concessional contribution. The government will then also make a co-contribution of 50% of your contribution, up to $500 (ATO 2022).  This is effectively a 50% return on your money immediately. If your income is between $42,017- $57,016 you will still be eligible for the government co-contribution at a progressively lesser entitlement.

Spouse contribution

If your spouse earns less than $37,000 annually, you can contribute a maximum of $3,000 to their superannuation and be eligible for a tax offset of $540.

If their income exceeds $37,000, you’re still eligible for a partial offset. However, once their income reaches $40,000, you’ll no longer be eligible for the offset, but can still make contributions on their behalf.

Hint: Ensure your accountant is aware and lodges on your personal tax return.

Tax deductible contributions to superannuation

The 2021-22 concessional cap is $27,500. Concessional contributions to super are made up of employer contribution, salary sacrifice and personal deductible contributions. This can be a very effective way to reduce your tax liability and build retirement savings.
Example: Claire earns $120,000 p.a. Her employer contributes the legislated 10% of her income to superannuation ($12,000).
Claire gross employment income
$120,000
Concessional contribution cap
$27,500
Employer contributions (10% of salary)
$12,000
Unused concessional Cap
$15,500
Claire makes $15,500 additional contribution to super
Superannuation tax rate 15%
$2,325
Personal tax deduction 34.5% (Marginal tax rate including medicare)
$5,347.50
Net benefit
$3,022,50
Hint: If you plan to contribute into super, please do so well in advance of 30 June. This will ensure there is enough time for your super fund to process the contribution

Unused contribution cap

If your super balance is less than $500,000 on 30/06/2021 you may be eligible to carry forward any of your unused contribution cap since 01/07/2018 to make a greater personal deductible contribution to super this financial year.
Example: Lucy’s super balance at 30/06/2021 was $365,000. She has recently received an inheritance and would like to consider maximising her personal deductible contributions to super this financial year. Below is a summary of previous contributions since 2018.
Financial Year 2018/19 2019/20 2020/21 2021/22
Cap
$25,000
$25,000
$25,000
$27,500
Actual contribution
$7,000
$7,000
$8,500
$15,000
Unused cap for the year
$18,000
$18,000
$16,500
$12,500
Cumulative Carry Forward
$18,000
$36,000
$52,500
$65,000
Total Super Balance at 30 June Previous year
$305,000
$325,000
$350,000
$365,000
Lucy can make up to $65,000 as a personal deductible contribution using her cumulative carry forward cap.

Re-contribution strategy

The purpose of a re-contribution strategy is to replace the taxable component of the funds being withdrawn and re-contribute funds to the tax-free component. From an estate planning perspective, a withdrawal and re-contribution strategy can minimise the taxable component of any benefit paid on death. This could result in a significant tax savings where your super is being paid to a non-dependant.

Example: Daniel is aged 65. Although he is still working, he has met a condition of release. He has $300,000 in superannuation. His beneficiary is his 28 year old son, Mike, who is a non-dependant.

Daniel’s current superannuation components are:

  • Taxable = $200,000 (67%)
  • Tax free = $100,000 (33%)
  • Current estate planning tax for Mike will be (200,000 x 17%) = $34,000
  • By withdrawing 300,000 and re-contributing to superannuation as a non-concessional contribution, Daniel’s components will be:
  • Taxable = $0 (0%)
  • Tax free = $300,000 (100%)

This means estate planning tax will reduce to $0 for Mike.

Hint: This is a complex strategy which would require tailored advice from your Navigate Financial adviser.

Managing total super balance (TSB)

If you have met preservation age and your superannuation balance is over $500,000, withdrawing an amount out of super to reduce your TSB to below $500,000 may allow for tax planning through the use of the catch-up concessional contributions provision for the next financial year. You will be able to claim part or all of the contributions as a tax deduction (where all conditions are met).

This is a complex strategy which would require our tailored advice. Please speak to your Navigate Financial adviser for more information on the above strategies, and to see if they can be of benefit to you for your personal circumstances.

Jenna Carey is a committed financial planner whose biggest motivation is to see her clients prosper as a result of them reaching the best financial outcome.

Feel free to contact Jenna or one of the team at Navigate Financial Group who are here to support your financial decision making, leading you confidently into your financial future.

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.