The end of the financial year (EOFY) is approaching, and it’s time to start thinking about your retirement savings. With recent proposed changes to superannuation announced by Treasurer Jim Chalmers, now is the perfect time to start planning to supercharge your savings. In this article, we’ll go over some strategies for maximizing your contributions and taking advantage of the tax benefits of extra contributions.
Maximizing Contributions into Your Super
To take advantage of the opportunity to maximize your contributions, it is important not to wait until the last minute. One of the simplest ways to boost your retirement savings is to contribute a bit extra into your super account from your before-tax income. When you make a voluntary personal contribution, you may even be able to claim it as a tax deduction. If you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000, you can also make a carry-forward contribution.
Different Strategies for Boosting Super
There are several strategies to consider when it comes to boosting your super. If you have some spare cash and have reached your concessional contributions limit, received an inheritance, or have additional personal savings you would like to put into super, voluntary non-concessional contributions can be a good solution. Downsizer contributions are another option if you’re aged 55 and over and plan to sell your home. The rules allow you to contribute up to $300,000 ($600,000 for a couple) from your sale proceeds.
Tax Benefits of Extra Contributions
Making extra contributions before the end of the financial year can give your retirement savings a healthy boost, but it can also potentially reduce your tax bill. Concessional contributions are taxed at only 15 per cent, which for most people is lower than their marginal tax rate. You benefit by paying less tax compared to receiving the money as normal income. Some voluntary personal contributions may also provide a handy tax deduction, while the investment returns you earn on your super are only taxed at 15 per cent.
Annual Contribution Limits and Excess Tax
Before rushing off to make a contribution, it’s important to check where you stand with your annual caps. For concessional contributions, the current annual cap is $27,500, and for non-concessional contributions, for most people under age 75, the annual limit is $110,000. Your personal cap may be different, particularly if you already have a large amount in super, so it’s a good idea to talk to a financial advisor before contributing. If you exceed these limits, you will pay extra tax. However, there may even be an opportunity to bring-forward up to three years of your non-concessional caps so you can contribute up to $330,000 before 30 June.
In conclusion, preparing for EOFY can be an excellent way to supercharge your retirement savings. By maximizing your contributions, considering different strategies for boosting your super, taking advantage of tax benefits, and understanding annual contribution limits, you can set yourself up for a healthy and happy retirement.
Vogue Advisory Group – How we can help
Vogue Advisory Group financial advisors can provide assistance with all aspects of preparing for EOFY and supercharging retirement savings. Here are some specific ways they can help:
- Maximizing Contributions: A financial advisor can help you determine the optimal amount to contribute to your super account and the best time to make the contribution. They can also advise on the various types of contributions you can make, such as concessional, non-concessional, and carry-forward contributions.
- Different Strategies for Boosting Super: A financial advisor can provide guidance on the different strategies for boosting your super, such as downsizer contributions, salary sacrifice, and spouse contributions. They can help you evaluate which strategy is most appropriate for your individual circumstances.
- Tax Benefits of Extra Contributions: A financial advisor can help you understand the tax benefits of extra contributions, including the concessional tax rate and tax deductions for personal contributions. They can also help you optimize your tax strategy by balancing your contributions with your other income and deductions.
- Annual Contribution Limits and Excess Tax: A financial advisor can help you determine your annual contribution limits and advise on strategies to avoid exceeding them. They can also help you understand the consequences of exceeding the limits, including excess tax and penalties.
Overall, a financial advisor can provide expert advice and tailored strategies to help you maximize your retirement savings and make the most of the opportunities presented by EOFY.
