Super Piece of Planning That, Really Marvellous Stuff

14 March 2024

Article by Craig Lane

With apologies to the late, great Richie Benaud for the title of this article, the opportunities in utilising superannuation are significant, and represent a permanent reduction in your income and tax rate (vs. the many timing/deferral-only reductions out there).  

Ordinary Contributions

The annual limit for deductible superannuation contributions is $27,500 per person, which could lead to personal tax savings of over $10,000, depending on your personal income. 

Catch up Contributions 

Although the annual limit is $27,500 per person, if you have less than $500,000 in superannuation, and have not made the maximum contributions previously, you can “catch up” up to 5 years’ worth of previous limits. 2019, 2020 and 2021 allowed $25,000 per year, before the increase to $27,500 for 2022 and 2023. 

So, you could potentially contribute $157,500 to super this year, and claim a tax deduction for the whole lot. 

Reserved Contributions 

At the risk of sounding like a steak knife salesman…but wait, there’s still more.  

The Tax Office allows contributions made in June each year to be “reserved” for the following financial year, effectively not counting toward the current year’s limits. Further, the limit for deductible contributions is increasing to $30,000. So that could push your total deductible contributions this financial year to as much as $187,500! 

Cash vs. Listed Shares vs. Land Contributed 

Of course, the tough year experienced by many in 2023 means cashflow may be running short. While most contributions to superannuation are made using cash, listed shares and even farm land can be transferred to superannuation as a contribution. 

Non-Concessional Contributions 

The final type of contribution to consider is non-concessional. Although not generating a tax saving itself, the earnings on the funds transferred are taxed at only 15% (and then 0% in retirement!), not your marginal rate. Importantly, the annual limit on these types of contributions is $110,000 (rising to $120,000 in July 2024), and most people are able to bring forward a further 2 years’ worth, meaning the limit is $330,000.  

Super Exit Tax 

We don’t have death duties in Australia anymore… or do we? The Tax Office certainly will get its claws in to your superannuation if you will it to anyone but your spouse or children under 18. The “taxable” component will be subject to 17% tax on your passing, if left to non-dependents per the SIS Act. 

However, there are strategies available to minimise this impact, including: 

  • Making non-concessional contributions to lower the taxable component and increase the tax-free component, 

  • Withdrawing your superannuation during your lifetime, and 

  • Nominating your superannuation to your estate, which reduces the tax rate, albeit only marginally, to 15%. The more important issue with this step for anyone with farm income is that the super balance will not appear in the beneficiary’s Primary Production average history, likely saving a significant amount of tax over the following 4 years. 

Talk to your Byfields accountant today, who will work with our specialist superannuation team to tailor advice specific to you. 

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