End of Financial Year Opportunities – Superannuation
As we draw near the end of financial year (EOFY), most of us tend to start thinking about ‘tax time’.
The time of year you pop in to see your trusted accountant in the hope of getting a bigger tax refund than last year. Yes, a cash injection is nice, however did you know there are more opportunities at the end of the financial year than just your tax?
Superannuation is the thing each flavour of Government like to fiddle with in each May Budget. They simply cannot resist the urge to slightly tinker with the rules. How much can you put into Superannuation? How much can you take out? At what age am I allowed to do this? How much am I allowed to have in Superannuation? These are all questions Adviser’s receive regularly and they are all completely fair.
One thing about Superannuation that hasn’t changed much over the years is its tax effective nature; a tax haven some call it. In June of each year working people should really consider the opportunity of putting more money into Superannuation. There are multiple benefits, depending on your age and income of course. Firstly, you can potentially save up to 32% in tax. Further, Superannuation is a great way to save for your retirement. Yes, contributing more money to it now means you do not have instant access to it until you meet a condition of release. However, as you near retirement, you will likely be thankful for every extra dollar you put into Super through your working years. Remember, there are different ways to get money into superannuation and each have their own form of rules and restrictions, so contact one of our advisers for more information.
The EOFY opportunities do not stop with those still working. Our retired friends can also benefit. I will use a common example called a Cash Out, Recontribution strategy.
Roberta is 60 with a superannuation balance of $600,000 and has 2 adult children. Roberta’s taxable portion of her balance is 100% and for the purpose of this illustration we will assume the fund does not grow. This would mean in the event of Roberta’s untimely passing; her Superannuation proceeds could be taxed at up to 17% as they are passed to her two adult children. This is around $102,000 going to the tax man. As the EOFY is getting close, Roberta has time to potentially withdraw $300,000 from her Super fund, and then recontribute these funds as a non-concessional contribution back to Superannuation. The taxable portion of the recontributed amount is now 0%. As Roberta has used the bring forward rule, she cannot complete this strategy for another three years.
However, when the time comes, Roberta can complete another Cash Out, Recontribution strategy and reduce her total taxable portion of Superannuation to 0%, not just half of it. This strategy could save the family a tax bill of over $100,000 with little disruption to Roberta’s well-deserved retirement.
The Government has also recently announced additional means to get money into superannuation after you have sold a home, and in the most recent Budget, they have also increased the age of which you can get money into Super and relaxed the eligibility. As the EOFY approaches, it is time to consider your options.
If you have recently checked your Super statement and wonder what the high taxable portion might mean, or have just sold your house to downsize, please do not hesitate to reach out to an Adviser from Mulcahy & Co to see how they can help you make the most of the EOFY opportunities available to you.
Contact our Financial Planning experts here
Episode 29
End of Financial Year Opportunities – Superannuation.
Financial Planner Danny Archer talks to us about some benefits you can take advantage of right now in time for the June 30th end of financial year. You can lower your tax bill and contribute to your superannuation. Danny does a great job of relating his thoughts into bite sized pieces making it easy to understand including an interesting case study - enjoy!
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