With the end of the financial year fast approaching, there may be opportunities to be aware of or considerations to be made depending on your situation. 

1. Salary sacrifice

Is an agreement between you and your employer to pay some of your pre-tax salary into super. This is often very tax-effective. The amount you contribute to super is taxed at up to 15% (up to 30% if your income is over $250,000 p.a.) rather than your marginal tax rate, which might be up to 47%. Salary sacrificed amounts to super are considered concessional contributions.

Depending on your circumstances, this strategy could result in a net tax saving of up to 32%. The funds invested in a low-tax environment would then benefit from compounding returns over time.

2. Personal deductible contributions

You can usually make your own personal contributions and claim a tax deduction for them to achieve the same tax outcome as salary sacrifice. This is a concessional contribution.

You can make a personal super contribution before 30 June and claim a tax deduction if you:

• want to top up employer super and salary sacrifice contributions tax-effectively

• terminate employment and receive taxable employment termination payments or lump sum unused leave entitlements

• receive bonuses, or

• have taxable investment income and taxable capital gains from the sale of assets.

To be eligible to claim the super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form to your super fund within the required time frames. You will also need to receive an acknowledgement from the super fund before you complete your tax return, start a pension, withdraw or rollover money from the fund to which you made your personal contribution.

Did you know the annual concessional contribution cap is increasing to $30,000 in FY 2024/25, as well as the Superannuation Guarantee contributions rate, which is going from 11% to 11.5% of your salary?

3. Non-concessional contributions (NCCs)

NCCs are personal contributions to super made from post-tax income or available capital, exempt from contributions tax.

An annual cap for NCCs is currently set at $110,000 for 2023/24, four times the annual concessional contribution (CC) cap.

Individuals under 75 as of 1 July in a financial year can potentially bring forward up to two years of NCCs, allowing for a larger upfront contribution.

Starting July 1 this year, the annual NCC cap will increase to $120,000, and a new three-year bring-forward option will rise to $360,000.

Timing is crucial when activating the new NCC bring-forward rule. Many clients have already contributed $110,000 this year and plan to trigger the three-year bring-forward next year, potentially adding $360,000 more.

This could mean each parent can inject $470,000 into their super within the next two months!

Source: ATO

4. Spouse contribution tax offset

You may be able to enhance your spouse's retirement savings by contributing to your spouse's superannuation.

Eligible individuals can receive a tax offset of up to $540 by making super contributions of up to $3,000 into their spouse's account if their spouse earns $37,000 or less annually in 2023/24.

This contribution falls under the non-concessional category. The contribution needs to be made under the spouse contribution category.

To be entitled to the spouse contributions tax offset:

  • You must contribute to your spouse’s super. This is a contribution made using after-tax dollars, which you haven’t claimed as a tax deduction

  • You must be married or in a de facto relationship

  • You must both be Australian residents

  • The receiving spouse has to be under the age of 75

  • The receiving spouse’s income must be $37,000 or less to qualify for the full tax offset ($540) and less than $40,000 for you to receive a partial tax offset.

5. Spouse contribution splitting

Contribution splitting allows transferring a portion of your superannuation into your partner's account.

A client may choose to divide qualifying concessional contributions from the previous financial year into their spouse's super account in the subsequent year.

This strategy can assist eligible clients in harmonising their super balances as a couple.

If a plan to split personal deductible contributions exists, the Notice of Intent must be submitted and confirmed by the fund prior to initiating the contribution splitting process.

You can apply to split your contributions when you are any age, but your spouse must be either:

  • Less than the preservation age that applies to them or

  • Aged between their preservation age and 65 years, and not retired.

6. Unused concessional contribution cap catch-up

If your concessional contributions (CCs) in a given financial year fall below the annual cap, you can carry forward these unused amounts for up to five years. This allows you to potentially contribute more in a future year if you meet eligibility criteria.

The flexibility to make larger contributions when suitable can be beneficial, especially if you experience irregular income or have a significant capital gains tax liability.

To utilise your carried forward CCs via catch-up contributions, your total superannuation balance must be under $500,000 as of the previous 30th of June, and you must have unused CC cap amounts that can be accumulated from the past five financial years.

7. Government Co-contributions

Your spouse may be able to enhance their super account by making an after-tax contribution.

This action could lead to a government contribution of up to $500, known as a 'co-contribution.'

For your spouse to qualify for the maximum co-contribution in the financial year 2023/24, they must contribute $1,000 or more to their super while earning $43,445. The optimal amount is reduced for each dollar earned over this lower threshold and ceases when the spouse’s income exceeds $58,445.

You must be less than 71 years old at the end of the financial year.

With most super funds having set a deadline of 24th June to make contributions to be assured your funds will be applied to your account by 30 June, it is important that you make your contribution by this deadline to avoid the risk of missing out due to administrative or technical delays.

And lastly some good news on tax rates

For Australians 1 July 2024 will see the new tax brackets come into effect.

The table below provides a comparison of the current tax brackets to the new rates.

Source : ATO

The table below shows the annual tax savings (i.e. additional income received in the bank) based on various incomes.

Source: ATO tax calculator