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Get the most from your Superannuation

If you have contributed into a superannuation fund during the year, you should shortly receive correspondence from your superannuation fund asking you to elect the amount of your contributions that you intend to claim as a tax deduction. Before completing this election, there are a number of things you should be aware of to ensure you gain the maximum tax savings and benefits from your contributions.

1. Superannuation Contributions claimed as a deduction are taxed at 15%

As an example, lets say you earn $16,000 or less and you contributed a total of $1,000 to your superannuation fund during the year.  Due to the low tax offset you will generally pay no tax on this amount.  If however you claim a deduction for your super contributions, you will receive no tax saving, and your contribution will be taxed $150 in your superannuation fund. The end result is that your superannuation account will increase by a total of $850 ($1,000 - $150).

If on the other hand, in this circumstance you were to elect NOT to claim a tax deduction for the $1,000 contribution, your superannuation account will increase by a total of $2,000. This is made possible by the Super Co-Contribution which is outlined below.

2. Superannuation Co-Contribution

Most people are aware that the government will match superannuation contributions up to $1,000 dollar for dollar if your taxable income is below $31,920. As per the previous example, if you earn less than the $31,920 threshold amount, and do not claim your contribution as a deduction, you will be entitled to the full $1,000 co-contribution. If your income exceeds this threshold the co-contribution will reduce by 3.33 cents for every dollar up until your income reaches $61,919.

You should note however, if your income is higher than $16,000 and therefore have tax to pay, it may still be worthwhile considering not claiming your superannuation as a tax deduction. As an example, let’s say you have a taxable income of $30,000. If you claim a deduction for $1,000 you will save approximately $150 in tax. However, if you do not claim the contribution as a deduction, you will loose the $150 tax saving, but in return you will receive an additional $1,000 in your superannuation account.

Even if your income were to exceed the $31,920 threshold and it results in a lower co-contribution amount, the additional co-contribution you receive by not claiming a tax deduction for the first $1,000 of contribution, may be well above any additional tax you may have to pay.


Other considerations:

Some of the following circumstances may effect your eligibility to receive the co-contribution:

1.You are an employee educator; and/or
2.You receive income from sources other than family day care.

If either of these apply to you, please talk to your accountant to find out how you may be effected.
Remember also that the information above is a general information only and may not apply to your individual circumstance. As with any investment decision, including contributing to a superannuation, you should speak to a qualified financial planner to obtain advice specific to your circumstances.


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