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Welcome to the 2024 Tax Planning Guide. This comprehensive resource from *Orbit, offers practical advice on optimising your tax strategy, from claiming home office expenses, to leveraging investment opportunities and government incentives.
Superannuation contributions
While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.
Tax deductible super contributions cap
The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75. Individuals need to pass a work test if over age 67.
To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2024.
The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.
Carried forward contributions
Carry-forward contributions are not a new type of contribution, they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years.
This means if you don’t use the full amount of your concessional contribution cap ($25,000 from 2019 to 2021, and $27,500 for 2021 and 2023), you may qualify to carry-forward the unused amount and take advantage of it up to five years later.
Carry-forward contributions are calculated on a rolling basis over five years, but any amount not used after five years expires. These carry-forward rules only relate to concessional contributions into super, not non-concessional contributions, as they have different caps.
After this year any unused 2019 concessional contributions cap will be unable to be used in the future.
Spouse super contributions
You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria, and your super fund allows it. This is known as contribution splitting.
Doing this not only helps to boost your spouse’s retirement savings, but it can also help you save tax if your spouse has limited income.
You may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse if your spouse’s income is $37,000 p.a. or less.
The offset gradually reduces for income above $37,000 p.a. and completely phases out at $40,000 p.a. and above. Additional tax on super contributions by high income earners.
The income threshold at which the additional 15% (‘Division 293’) tax is payable on super $250,000 p.a. Where you are required to pay this additional tax, making super contributions within the cap is still a tax effective strategy.
With super contributions taxed at a maximum of 30% and investment earnings in super taxed at a maximum of 15%, both these tax points are more favourable when compared to the highest marginal tax rate of 47% (including the Medicare levy).
Considerations to reduce future tax
Ownership of investments
A longer-term tax planning strategy can be reviewing the ownership of your investments. Any change of ownership needs to be carefully planned due to capital gains tax and stamp duty implications. Please seek advice from your Financial Adviser or Accountant prior to making any changes.
Salary sacrifice into superannuation
Salary sacrifice can be a great way to boost your superannuation and pay less tax.
By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax.
Income protection insurance
Possibly your greatest financial asset is your ability to earn an income. Income Protection Insurance generally replaces up to 70% of your salary if you are unable to work due to sickness or an accident. The insurance premium is normally tax deductible if you pay the premium personally, plus you get the benefit of protecting your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind.
Conclusion
If you want to discuss any tax planning strategies for the coming financial year, contact MLS Financial today through our online contact form.
Disclosures:
- This information has been compiled from sources considered to be reliable, but is not guaranteed.
- Past performance is not a reliable indicator of future performance.
- The information contained on this website is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. MLS Financial and Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances.
