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Aaron Alston

A Superannuation Strategy that Could Save You $$$ Tens of Thousands in Tax Before 30th June 2024

Written by Aaron Alston

Salary sacrificing into super is a great way to boost your retirement savings by utilising pre-tax dollars and therefore reducing your taxable income.

Case Study

Mr. X (55) works Full Time and has a salary package of $115 000 p/a plus 11% super.  Mr. X is exploring ways to reduce tax and increase wealth as he approaches retirement.  Mr. X currently has a paid-off home, $150 000 in savings and $450 000 in superannuation.  After consulting a financial adviser, the adviser identifies that Mr. X has unused concessional contributions available from the previous 5 financial years that he is available to carry forward because his super balance is less than $500 000 as at 30 June the previous financial year.  The adviser recommends Mr. X salary makes a personal contribution into superannuation.

Concessional contributions cap for the 2019-2023 financial years

aaron graph 2

Total carry-forward concessional contributions cap – $130 000

Concessional contributions Mr. X has made into superannuation the previous 5 financial years (2019-2023 FY)

2019 – $10 000

2020 – $10 000

2021 – $14 000

2022 – $15 000

2023 – $21 000

Available concessional contributions Mr. X can make this FY

  • Maximum personal concessional contributions eligible for Mr. X to make in the 2024 FY – $157 500 ($130 000 carry forward + $27 500 concessional this FY).
  • Concessional contributions Mr. X made in the 2019-2023 financial years – $70 000.
  • Current concessional contributions made in 2024 FY – $12 650 ($115 000 salary x 11% super contributions).
  • Unused concessional cap available to carry forward – $60 000 ($130 000 – $70 000).
  • Available concessional contributions 2024 financial year to maximise concessional cap – $14 850 ($27 500 – $12 650).
  • Total concessional contributions available Mr. X can make in 2024 – $74 850 ($60 000 + $14 850).

Recommendation

1 – With available savings of $150 000, the adviser recommends Mr. X makes a $74 850 personal contribution into superannuation before 30th June 2024 ($60 000 carry forward contribution + $14 850 contribution to maximise the 2024 concessional cap).

2 – The adviser assists Mr. X by submitting a notice of intent to claim a deduction to his superannuation fund for the personal contribution made.

Potential tax saved on $74 850 personal contribution

  • As Mr. X earns between $45 000 – $120 000, Mr. X will pay 34.5 cents (32.5% tax rate + 2% Medicare levy) tax for each dollar earned over $45 000.
  • The tax payable into super at 15% – $11 228 ($74 850 x 15%).
  • Tax saved in personal name – $25 736 ($30 142 tax payable on $115 000 income LESS $4 406 tax payable on $40 150 income) – Source – https://paycalculator.com.au/

Total tax saved – $14 508 ~ $15 000!!

($25 736 income tax less $11 228 contributions tax)

The tax saving will apply when Mr. X lodges his 2024 income tax return.

Summary

This article illustrates If you have unused concessional cap amounts from previous years, you can carry them forward and saved thousands in tax! You’re eligible to do this if you:

  1. Have a total super balance of less than $500,000 at 30 June of the previous financial year
  2. have unused concessional contributions cap amounts from up to 5 previous years (but not before 2018–19).

Source – https://www.ato.gov.au/individuals/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/concessional-contributions-cap/#Carryforwardunusedcontributions

If you are unsure whether you’re eligible for this strategy, speak to your financial adviser at Hudson in conjunction with your tax accountant.

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