With the end of the year nearly amongst us, Funder & Associates recap the Top Superannuation & Tax Strategies of 2017 that you can take with you and implement in the new year.
If your spouse earns less than $40,000 p.a. and you make a contribution to their superannuation, you will increase their superannuation and be able to claim a tax benefit, you may be eligible to receive a tax offset of up to $540 (18% of up to a $3,000 contribution).
If your spouse has:
The maximum offset is available if your spouse’s income does not exceed $37,000 and progressively reduces to zero up to a maximum spousal income of $40,000.
If you earn less than the prescribed income and at least 10% of your income comes from eligible employment or carrying on a business, the Federal Government will top up funds you contribute to superannuation with an additional contribution. This is known as a government co-contribution.
If you contribute $1,000 to your superannuation fund, the government will boost your contrition by up to $500. To receive the full amount 50 cents for every $1 you contribute, you must earn less than $36,813 p.a and meet the following criteria:
The government co-contribution progressively reduces to zero when your income reaches the maximum income threshold of $51,813 p.a. Note the assessable income threshold includes reportable employer superannuation contributions and reportable fringe benefits.
To be eligible, you will need to be less than 71 years of age, have made at least one after-tax contribution, be in full or part-time employment or run own business and include all the details of your after-tax contribution on your tax return.
From 1 July 2017, you are able to claim personal superannuation contributions as a tax deduction, provided you meet the following criteria:
By contributing to superannuation, you not only increase your superannuation, but also reduce your income tax bill. Your superannuation contribution will be taxed at 15% upon entry to your superannuation fund, but your income tax will be reduced by the amount of the contribution up to prescribed threshold meaning you will benefit from the overall tax savings.
Your transfer balance cap is the limit on the total amount of superannuation that you can transfer into a tax-free income stream. From 1 July 2017, the standard transfer balance cap is $1.6 million.
However, you can split your superannuation contribution with your spouse so that you can attempt to balance out your transfer balance caps. Couples can therefore target each of their individuals $1.6 million transfer cap to maximise their combined transfer cap amount of $3.2 million.
This can be achieved by splitting contributions with your spouse. UP to 85% of concessional contributions from a previous year can be transferred to your spouse, provided the receiving spouse is aged under 65.
Contributions can be split after the end of the financial year and only in the subsequent financial year. For instance, contributions made in the 2017/18 year can be split in the 2018/19 year.
Paying the interest on an investment loan in advance for the following financial year could enable you to enjoy a larger income tax deduction this financial year.
This is because you are able to claim the interest as a tax deduction this financial year, even if the interest is for servicing the loan in the following financial year.
Paul earns $70,000 p.a. and is using a gearing strategy to invest as part of his long-term wealth creation strategy. He takes out an investment loan for $100,000 at a rate of 7.5%.
He pays 12 months’ interest in advance and can deduct this from his income tax for the current financial year.
In doing this, his taxable income is reduced from $70,000 to $62,500 for the current financial year.
If you need further assistance on Top Superannuation & Tax Strategies of 2017, please do not hesitate to contact Funder & Associates.