Lump Sum Contributions no allowed before June 30

Superannuation is the best asset-protection vehicle in our country, so all of us should really understand it a bit more.

In addition, to encourage us to put money aside to fund our own retirement, earnings inside Super are taxed much less (15%, and then 0% once you hang your boots up).

But there are restrictions on how much we can put in every year.

We can each Concessionally contribute $25,000 this financial year, which is just a fancy way of saying we can claim the contribution as a tax deduction.

Concessionally contributing the maximum $25,000 into Super cops a 15% contribution tax, but if you’re on an effective tax rate of 39%, you pocket 24% of it, being instantly $6,000 better off. Just like that.

$25,000 x (39%-15%) = $6,000

For PAYG earners, if you haven’t been salary sacrificing, don’t worry! You can now make a lump sum payment before June 30 and claim it in your 2021 tax return.

This has been around for over a year but if you haven’t been told about it, I guess you wouldn’t know. Just make sure you complete the ATO Notice of Intent to Claim form and send it to your superfund straight away.

Remember the $25,000 cap includes what your employer has paid via SG. So, if your salary is $100K + Super of 9%, you can only tip in an extra $16,000.

For those who own their home, or less than 5 years away from retirement, it’s generally a no-brainer. But still worth considering for many others!!

You know the drill guys, this advice is general in nature, meaning it has considered your financial position and objectives; it’s just to get you thinking and to take steps if you think you might benefit from some personal advice.

Now, I have so much to say to business owners about the Instant Asset Write-off Scheme, where claiming these purchases immediately in 2021 as allowed, might not be beneficial in the long term.

Whilst paying no tax for 2021 might sound great, depreciating assets over 4 years or so will take advantage of the smaller marginal tax rates over the next few years might leave you much better off. Use them or lose them!

lump sum chart

Anyway, I’ll be watching TV on Budget night on May 11 with my eye on any changes to Depreciation Rules, so will have more to say in a few weeks. Far out, I just realised how boring I am.

Hope you’re having a great week,