By Chris Simm.
Cost of living pressure is the topic of the moment, and tax never goes away, so we have put together some of our best ideas to help you save tax and make the most of your money.
At Muirfield, we’ve been in regular contact with our clients, re-examining financial plans and adjusting our strategies where required. Nothing in this list will make you rich but it may help ease some of the pain of a tough financial year:
1. Add More to Save Tax
Make a lump-sum contribution to your superannuation account and claim a tax deduction. In the past this option was restricted to those who are self-employed but now anyone can do it.
Of course, there are strict limits (see below), but you can make what is known as a ‘concessional’ contribution which is taxed at 15% (as opposed to your Marginal Tax Rate) on the way into your superannuation fund. If your taxable income is above $45,000 then you will likely save 19.5% on every dollar contributed. Not a bad risk-free return on your money.
If you are over 60 there is a chance you could pull money from super and recontribute it for a tax deduction—better known as superannuation recycling. This one gets a little tricky though so best to speak with your financial adviser if it applies to you.
2. Carry it Forward
Normally the annual limit for tax deductible contributions mentioned above is $27,500, however, under new legislation you can ‘carry forward’ unused amounts of the contribution limit from previous financial years. Read this article on our blog for information on this topic.
If you have less than $500,000 in Super, then it is well worth considering this strategy.
3. Low Income Contribution
If you are working and have taxable income under $41,112 then you can make a $1,000 contribution to your Super account and the government will automatically credit your account with $500.
The benefit is scaled down until your taxable income reaches $56,112 where no co-contribution is payable. Read here for more information on this gem.
4. Spread the love to your Spouse!
You can take up to $3,000 from any of your bank accounts and contribute it to super in your spouse’s name. They will be thrilled with an increased Super balance and you will get a tax offset of $540 from your annual tax bill. A healthy 18% return from the $3,000 invested. Now that’s love. It’s important to bear in mind your spouse’s income needs to be under $37,000 to get the full benefit and under $40,000 to get any benefit at all.
5. Contact Muirfield Financial Services
Feel free to implement any of these contribution strategies yourself, however, be warned, we’ve only provided some of the high level eligibility criteria.
Alternatively, we can help review your financial situation and help you pick the low-hanging fruit when it comes to saving tax with your super.
Otherwise, here’s hoping for a more stable financial year ahead.
Make sure you get a copy of our new booklet explaining all the ins and outs of retirement too. It’s called: “The Ultimate Guide to a Hard-Earned Retirement” and serves as a guide to all topics pre-retirement and post-retirement.