How to save on tax this financial year

We’re nearing the end of another financial year. That means it’s tax time. When it comes to superannuation there’s a few matters to consider, one of the most important for members is making extra contributions.

“Many people do not realise they can contribute to their super and receive a tax deduction,” says smartMonday senior smartCoach Patrick Howard.

Deductions may enable you to reduce your taxable income, which means you’ll be paying less tax. This is a key benefit of super, that it is taxed at 15%, which is lower than most people’s marginal tax rate.

“It is a fairly straightforward process that applies whether you earn a salary, work for yourself or contribute from another income source.”

You may be able to claim personal contributions as a tax deduction when completing your tax return:

• for up to $27,500 in total (the concessional cap) – check how close you are to this limit by logging into your personal homepage (if you have other super accounts you'll need to check those as well).

• if we receive them before the end of the financial year – don’t get caught out by missing your payroll cut-off or by contributing too close to the end of the financial year – for 2022-23 we recommend using BPAY to make contributions by June 16 or 23, depending on your account type.

Just remember that you can’t claim a tax deduction on:

• contributions organised through your employer already taxed at the 15% rate (such as their compulsory payments, any salary sacrificing you’ve organised with them or any further employer contributions)

• some special contributions, such as COVID-19 recontributions or downsizer contributions.

You can catch up on previous years

If you’ve contributed below the concessional cap in any financial year from 2018-19 onward, you may be able to contribute any unused amounts this financial year.

“You can only do this if your total super balance is less than $500,000 at the end of last financial year and if your extra contributions mean you’ll exceed the $27,500 cap this financial year,” says Howard.

Bigger contributions from your after-tax income

You can also make after-tax contributions to build up your super. This financial year most people can contribute up to $110,000 without paying any further tax if their super balance is below $1.7 million. (These contributions are in addition to the maximum $27,500 before-tax contributions.)

In addition, if you are younger than 75 you may be able to bring forward up to three years’ worth of future after-tax contributions. for a total of $330,000. (To bring forward any amount your total super balance must be below $1.7 million at the end of last financial year.)

You can read more about this on the tax office’s bring-forward arrangements webpage.

Contribute to your spouse’s super

• You may be able to add to your spouse's super to reduce your tax, as long as they're under 75 years of age. If you want to claim a tax offset for this there are certain rules that you need to take into account.

On a lower income? The government may contribute for you

• Those with a total income up to $57,016 may be eligible for a government co-contribution of up to $500 if you make an after-tax contribution.

• If your taxable income is less than $37,000, the government may pay an offset directly into your account.

In some cases you’ll have to pay more tax

• If your combined income and concessional contributions exceed $250,000 you may pay additional tax on your superannuation contributions.

The above only highlights some tax features of super, so you may like to read more detail on the Australian Taxation Office website or speak to one of our smartCoaches at no additional cost to you.

“There can be a lot to consider at tax time, but our smartCoaches can guide you through your key concerns to work out a clear course of action for your super before the end of the financial year,” says Howard.