With piles of receipts to sort through and oodles of paperwork to gather, tax time can be, well, a rather taxing experience!
But by putting in a little effort at the end of the financial year, people can reduce the amount of tax they pay and keep more of their hard earned cash in their pocket.
For many people, contributing to super is one simple way to minimise their tax bill and boost their retirement savings at the same time.
For others, by topping up their super before 30 June 2012, they may be eligible for a tax offset or even a government co-contribution.
Here are five smart superannuation tips for tax time:
· Get super smart if you’re self-employed – super contributions are 100 per cent tax deductible for self-employed people such as sole traders. By making tax deductible super contributions, the self-employed can significantly reduce their tax liability on their income from business sources, investments or even capital gains.
But care needs to be taken not to exceed contribution limits as penalties apply. This limit is $25,000 for those aged less than 50. And currently, for people aged 50 and over this limit is $50,000.
From 1 July 2012, this limit will be reduced to $25,000 regardless of age.
· Give your spouse’s super a boost – if your spouse is not working, or earns less than $13,800 per year, you may be entitled to claim an 18 per cent tax offset (up to $540) if you make a contribution to their super. This strategy will allow your spouse to build their super for retirement and reduce your tax bill.
· Make the most of the Government’s co-contribution – eligible people who earn less than $31,920 this year can take full advantage of the Government’s co-contribution scheme if they make an after-tax contribution to their super. The Government currently contributes $1 for every $1 of non-concessional (personal after-tax) contributions up to a maximum of $1,000. For the 2011/12 year, a reduced co-contribution payment is available for incomes up to $61,920.
The matching rate and maximum co-contribution amount are expected to be halved from 1 July 2012.
- Small businesses should ensure super is up to date for employees – in order to be eligible for a tax deduction during the current financial year, businesses need to make sure that all superannuation payments have been paid for their employees before 30 June 2012
- Review your super before the concessional cap changes - people aged 50 and over can currently receive employer superannuation contributions via the super guarantee and salary sacrifice up to $50,000 before penalties apply. From July 1, this limit will reduce to $25,000. So it’s advisable for people to review their super before the end of the financial year, to ensure they don’t breach the new cap next year.
If people want to top up their super before the end of the financial year, be aware the contribution must be received by the super fund by June 30, so it’s important to allow time for it to be processed.
Finally, tax matters can be complicated so people should seek help from their financial planner to ensure they receive advice about their individual circumstances.
Bye for now