It’s almost tax time – yay! *insert sarcastic smile here*
I’m not going to get into a debate about our simple (or not so simple) tax system here in Australia but instead we are going to discuss something that has been fairly topical with many of our clients; end of year tax planning.
Whilst paying tax is an integral part of the modern world and brings with it a range of communal benefits, we rarely find our clients are popping bottles of champagne when they see their end-of-year tax bill. It can be scary and quite large for many people!
So today, we wanted to share a strategy which might work for you if you meet a few key criteria:
- You are a member of a couple;
- One spouse earns more than $37,000 and the other earns less than $37,000; and
- The spouse earning less has a superannuation account.
If you tick the above 3 boxes then a “Superannuation Spouse Contribution” might be something you can take advantage of. In short, it offers the spouse earning the greater amount of income an opportunity to reduce their annual tax bill by making contributions (of up to $3,000 to enjoy the maximum benefit) to their spouses superannuation fund.
Not only that, but if you find yourself in a position where you are making less than $37,000 of taxable income you might find a few other strategies can help you squeeze out that little bit more from your dollar. The Government “co-contribution” has been around for many years and it effectively encourages low income earners to save for their own retirement by making extra contributions to superannuation. If you do this, as the name suggests, the Government will match your contribution.
In addition to the above, there is also something which is technically referred to as a “Low Income Super Tax Offset” or LISTO for short. This is another Government measure to assist people on lower incomes save more for their eventual retirement.
When you combine the above 3 strategies you might find the benefits are in the thousands of dollars for you and your family. When repeated year on year the savings can become exponential and it really can be the difference in retirement for many families.
Our advice? Don’t rush into doing anything as whilst superannuation is a great savings vehicle it’s not always the best option if you are still a long way from retirement. To be sure, seek advice and do your own research. Or better yet, reach out to us and we can help!