Super tip – Maximise super contributions to minimise your tax obligations

It is highly beneficial for people to be aware of certain information that can significantly impact their superannuation and tax payments. So, let’s explore further.

Each year, there is a specific limit on the amount you can contribute to your superannuation fund. By contributing this amount, you can reduce your personal income and subsequently decrease the amount of tax you need to pay. This type of contribution is known as a concessional contribution, and the current yearly cap is $27,500.

It is important to note that the cap of $27,500 includes both your personal contributions and the contributions made by your employer. Several years ago, legislation was introducedbit-sized tips stating that if an individual's super fund balance is under $500,000 and they haven't used the full concessional contributions cap in a given financial year, the unused amounts can be carried forward for up to five years before expiring. This policy came into effect starting from the 2018-2019 financial year.

For instance, let's consider the 2018-2019 financial year when the cap was set at $25,000. If you only contributed $15,000 during that year, you would have an unused amount of $10,000. In the next financial year, you can contribute a further $10,000 which may reduce your taxable income. 

It seems that quite a few people are unaware of this unless they have been informed about the legislation changes or have consulted with a financial adviser.

What happens if someone has a Self-Managed Super Fund and passes away without a binding death nomination form? Do you need to take the funds out?

The best course of action here is going to be highly dependent on who is the remaining trustee of your self-managed super fund (SMSF) and what the trust deed says. If you happen to be the remaining trustee, you may have the authority to make decisions. It is worth noting that many modern trustee deeds include provisions for this scenario deed, although older trust deeds may not. For further details, please contact Bruce directly.

I have received some cash in the form of an inheritance, that I’m looking to invest in, but am nervous about the current market. What can you suggest reducing the chances of losing these funds after investment? I am looking at a long-term investment of at least the next 10 years. 

If your investment horizon is at least 10 years and you're concerned about market volatility, here are some suggestions to reduce the chances of losing your funds:

Start with asset allocations super and tax

The key is to get your asset allocation right. That means finding the right balance between growth assets and defensive assets in your portfolio. The mix you choose will depend on the return you want to target and how much risk you're comfortable taking with your funds.

Consider dollar cost averaging

Given the current market volatility, you might want to try a strategy called dollar cost averaging. This is actually pretty straightforward. Instead of investing all your money at once, you spread out your investments over equal instalments over a set period of time. You could consider a period of six-to-twelve-months to invest your capital.. You could do it longer or shorter, but investing the funds in a disciplined way, like every month or every second month is key. 

Let's say you decide to invest monthly over the course of a year. If the markets go down after your first investment, great news! You'll be buying at a lower price the next month. And if the markets continue to dip, you'll keep getting in at lower prices. This helps bring down your overall entry price.

Of course, there's a risk. If the markets suddenly skyrocket, you'll be buying at higher prices each month. But here's the thing, the money you've already invested will still be benefiting from any growth. So, it's not a foolproof plan, but it can certainly help you navigate the market's ups and downs. After all, we know that markets tend to recover eventually.

Keep in mind that if the markets take off right away, you might miss out on some of that growth. But at least you'll have some money invested, and that's a step in the right direction.

Remember, investing always carries some risk. It's a good idea to chat with a financial advisor who can provide personalized guidance based on your specific situation.

With the employer contribution set to increase on July 1st, if I'm salary sacrificing to reach the maximum concessional amount of $27,500 per year, will I need to lower my own salary sacrifice to avoid breaching my annual limits?

Yes, it's highly likely that you will need to make adjustments. The employer contribution rate is going up from 10.5% to 11%, which means your employer contributions will increase accordingly. As a result, there will be less room available within your remaining concessional contribution cap. Therefore, to avoid exceeding the cap and potential penalties from the tax office, you will need to reduce the amount you are currently salary sacrificing on a monthly or fortnightly basis.

How will the superannuation payments change following the federal budget? super and tax tips

The end of the financial year is a great time for people to reflect on their superannuation fund and ensure it aligns with their goals and desires. It's essential to review the fund's long-term performance and assess how it's doing because there are always alternatives available. Remember, you have choices when it comes to your superannuation.

It is also worth noting that starting from July 2026, there will be a positive change. Employers will be required to make employee contributions and deposit funds directly into your superannuation account on your payday. This is a significant improvement as it means the funds will be invested promptly, going straight into your super fund instead of waiting for a whole quarter.

How will the 2023 federal budget super contribution changes affect small businesses?

Small business owners will need to enhance their budgeting skills to adapt to these changes. Currently, they might be paying salaries first and then using the profits or income received after the pay date to cover superannuation contributions.

Looking at it from a small business owner's perspective and considering cash flow management, they will now have to plan ahead and factor in these contributions much earlier in their budgeting process. It will be crucial for them to collaborate closely with their accountant or finance manager to ensure they can fulfill their superannuation obligations on time.

It's unfortunate that what benefits one person may not necessarily be advantageous for another. However, in the realm of managing small businesses, adapting to new requirements is part of the game. By being proactive and working closely with their accountants or finance managers, small business owners can navigate these changes effectively.

How will the super changes affect workers?helpful tips

The super changes will have a positive impact on workers, specifically non-business owners and employees. When the employer contributions are invested promptly into their superannuation accounts, even for a slightly longer period, it can make a significant difference. Government reports have shown that the average worker could potentially see a $6,000 increase in their superannuation due to these changes.

This shift ensures that the money is not left idle with the business owner or in company accounts, but rather actively invested on behalf of the employee. This is undoubtedly a positive development as it maximizes the growth potential of the employee's superannuation funds.

Overall, these changes benefit workers by ensuring their contributions are working for them and have a longer time to grow, ultimately enhancing their financial outlook for retirement.


For more information

If you wish to speak with someone about these superannuation changes, please contact Rob Zammit or your local RSM adviser. 

Note: past performance is not an indicator of future results.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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