Tax help: How to prepare your super for EOFY

Even if your receipts are securely stored and you’ve got itemised deductions ready to rumble for tax time, have you thought about your super? 

Especially for younger Aussies, super might be a distant thought, only relevant to those approaching retirement. However, if you read the Australian Taxation Office (ATO) fine print on superannuation, there are a lot of super-related moves you can make to reduce the amount of tax you pay, while increasing your retirement savings.

As you read more about these options, make sure you’re aware of which tax bracket you fit into, as this will impact how you should prepare your super for the end of financial year. Also, always keep in mind super contribution caps.

Salary sacrificing for super

The current amount employers must contribute to your superannuation, known as the super guarantee, is 10% of your income as of July 1, 2021. As announced in the 2021 Federal Budget, this is set to rise by 0.5% each financial year until it hits a 12% cap.

But if you’re keen to lock away more funds for your retirement, you can organise for a larger portion of your pay packet to be sent directly to your super fund. 

This is a before-tax voluntary contribution which is taxed at a concessional rate of 15%, meaning you reduce the amount you pay on tax while you boost your long-term savings. For most people earning over $37,000 annually, this will be a tax win.

These kinds of payments are capped at $25,000 per year, inclusive of that 10% super guarantee which you should be receiving automatically.

Voluntary super contributions

These are known as after-tax super contributions, and are funds you transfer from your bank account or savings account into your super. Remember, you will have already paid income tax on any voluntary super contributions.

There’s an annual limit of $100,000 on non-concessional contributions if your super is under $1.6 million at the start of the financial year. But if you have the ability to contribute more than that significant sum, there is a work-around.

If you have less than $1.4 million in your super account, you can contribute up to the limit of the last three years in one go, allowing you to make a massive $300,000 in non-concessional contributions (assuming you made none in the previous two years).

If you choose to make concessional voluntary contributions, you can claim a tax deduction on the amount, but this is included in the $25,000 cap which also covers salary sacrificing.

Government superannuation co-contribution

This is a helpful bonus for low and middle-income earners who make voluntary after-tax super contributions. Depending on your income and the amount of extra contributions you’ve made, the government will contribute up to $500 per year to help boost your retirement fund.

The best part is, you don’t need to sign any forms to make it happen – the ATO will simply send the co-contribution straight to your super if you’re eligible.

Spouse super contribution tax offset

You’re entitled to a tax offset of up to $540 a year if you’ve made contributions to your partner’s superannuation while they are not employed or are a low-income earner. Your spouse – via marriage or de facto – will need to have an assessable income under $40,000 and meet other criteria for you to receive any level of the offset.

The amount contributing partners are entitled to will be determined by your partner’s wage, what other super contributions they’ve received from employers, and how much you contribute in the financial year.

First Home Super Saver Scheme (FHSSS)

First home buyers can reach their property ownership goals sooner while saving on tax through this handy scheme. By applying to the FHSSS, prospective buyers can add up to $15,000 to their super each financial year – up to a total of $50,000 – and have it released at 30% below their marginal income tax bracket rate for the purpose of buying property. This is on the condition that a contract to buy or build a home is signed within 12 months of the release request.

It’s a good option for anyone struggling to build up their first home loan deposit, but especially for couples, as both parties can save up to $50,000 through the scheme and combine resources for a property purchase. However, FHSSS funds still count towards each individual’s super contribution caps.

Downsizer contributions

On the other end of the property spectrum, homeowners looking to sell or downsize can contribute taxed profits they’ve made on the sale of their home (up to $300,000). This one won’t count towards before or after-tax contribution caps, but you can only make this kind of contribution once.

Again, if you have a partner you can both contribute this amount to your separate super funds, but you will have to meet the eligibility criteria. Conditions include being over the age of 65, having owned the home for ten or more years, and the residence not being a mobile home like a caravan or houseboat.

As you prepare your tax return, make sure you don't forget these working from home deductions and tax facts. And if you're on the hunt for new super options, check out the superannuation funds that were most recommended in the Mozo People's Choice Awards.