Time to explore your Super

Superannuation for many is an unknown or at least unexplored opportunity to increase the deductions you can claim in your income tax return.

Consider starting now in preparation for your 2023 tax return rather than leaving it until May and June in a last-minute scramble.

Why?

For two reasons.

1. To save tax. If your income is between $45,000-$120,000 you are paying tax at 34.5% including the Medicare levy. If you pay and claim personal contributions, you will be paying 19.5% less tax.
2. To increase the amount of contributions eligible for the First Home Super Saver Scheme. This is where you can access up to $50,000 of eligible contributions to go towards the purchase of your first home. Currently only salary-sacrifice and voluntary contributions are eligible for this scheme.

A short case study - Jim

• Jim earned wages of $85,000.
• He made personal superannuation contributions of $500 per month, a total of $6,000 during the year to June 2022.
  These contributions are not a salary-sacrifice arrangement, they are made directly from his bank account.
• His employer paid $9,000 in compulsory superannuation.
• Jim notifies his Fund that he intends to claim all his personal contributions.

Notifying the fund is required. The Fund is directed to pay the contributions tax amount and reports the change to the Tax Office.

In this example, Jim saved tax of $1,170 or 19.5% by paying and claiming superannuation contributions. He will receive a tax refund of $2,070 and $900 tax will be deducted from his superannuation fund balance.

This has the same net affect as salary sacrificing your contributions through your employer. Salary-sacrificing reduces the tax deducted from each pay. The advantage of doing it yourself is greater control over when and how much.

The catch is that your money will be locked up in your super for which there are very limited reasons you can access. One of these reasons being the First Home Super Saver Scheme as outlined above.

Additional information

The following table is a brief outline of the contribution types and their associated limits.

1. Reduces to nil if superannuation balance is more than $1.65 million. If under 75 years of age the annual limit can be brought forward to increase contribution up to $330,000 over a 3-year period.
2. Limit amounts are valid for the 2022-23 financial year.