With the tax planning season well and truly upon us, now is the time to consider superannuation strategies.
Despite the often-confusing nature of legislation changes, super remains one of the most tax effective structures available to Australian business owners. With that in mind, here are the key super matters to consider as we approach 30 June.
The Employer Super Guarantee is going up
First off, it’s important to remember that the Employer Super Guarantee increases to 10.5% from 1 July 2022. Business owners will need to consider the cash flow implications of this increase, as well as the impact on your own super arrangements. As we’ve previously covered, the penalties for late or incorrect super payments can be harsh and unforgiving.
Making the most of tax efficiencies through super
For business owners looking for additional tax efficiencies, making concessional (pre-tax) contributions to your personal superannuation has two benefits. It has a positive tax impact – 15% tax within the super environment vs up to 45% depending on your tax bracket. And, of course, the contribution itself boosts your personal super balance. This opportunity is particularly relevant if you have surplus cash in your business and room to move in your super account.
Get more into super
The concessional contributions annual cap became $27,500 this year, and recent catch-up legislation has made it possible to top up your super with the un-used portion of pre-tax contribution caps for up to 5 years prior.
Making additional non-concessional contributions (after-tax) of up to $110,000 (up $10,000 from last year) is also a worthwhile tax minimisation/retirement saving strategy. If you’ve recently sold business assets, for example, making a non-concessional contribution to your super will help you keep more in retirement savings and hand over less tax to the ATO.
The bring-forward rule, as the name suggests, enables you to bring forward three years of after-tax contributions into one financial year (up to $330,000) but this will depend on your super balance.
For these and other strategies, there are conditions relating to your age, fund provider (or if you have an SMSF) and super balance that will need to be considered in collaboration with your financial planner.
And of course, don’t believe everything you hear. We’re referring to the current raft of election promises, including some interesting superannuation opportunities relating to private property purchases and sales, that have no substance until the elected government follows through, and they pass the Senate to become legislated.
As with all of our tax planning services, our goal is for you to pay no more tax than your legal obligation.
And now is the time to act, as sufficient time is required for implementing tax effective strategies.
Pay contributions early
On that note, only superannuation contributions that are received into super BEFORE 30 June will count towards this year’s tax deductions.
May we suggest you organise for Employer Super Guarantee as well as your own personal superannuation contributions to be paid by 23 June to allow them to be cleared and arrive in your fund in time.
Visit our Tax Planning page to find out more or get in touch today to make an appointment.
If you need advice about this or any of the other topics we write about, please contact us on (07) 5438 8088 or email email@example.com.
Core Business Accountants specialise in business advice for growing and mature family-owned and small and medium-sized businesses.