The increase in the amount of super you can contribute as of the new financial year creates greater opportunity to stop wasting money on tax, and build and buy assets in a tax free environment.
In light of the new changes to the top marginal tax bracket due to start in the new financial year, this is something to be considered more closely from 1 July.
As of 1st July 2014, the concessional contributions cap (tax deductible amount) for those under the age of 50 will be increased from $25,000 to $30,000, and those aged 50 and above, the cap will be $35,000 (also increased by $5,000).
So what does this actually mean?
In a nutshell, if you salary sacrifice some of your gross (beforetax) salary and put it into your super fund, you get taxed at a rate of 15%, as opposed to your marginal tax rate (typically at least 34%, inclusive of Medicare Levy).
This is particularly attractive to higher-income earners due to their higher marginal tax rate of 47%, inclusive of Medicare Levy and the new National Disability Insurance Levy. Now with the Debt Levy being introduced from 1 July, for the next three years those earning $180k and over are paying 49% tax.
The ability to contribute an extra $5,000 will eliminate an extra $950 in tax wastage to those on a 34% tax rate, and $1,700 to those earning between $180 000 and $300 000 per annum.
The extra ability to contribute to super also helps with strategies designed to buy and pay off property in super with pre-tax money, or build share portfolios in a reduced or nil tax structure.
If you haven’t looked at your super contributions beyond what your employer puts in there, and would like to re-assess as part of your New Financial Year resolutions, call us to speak to one of our advisors on 9323 3000.