Tax, What's New
There are various superannuation benefits available to people with low incomes or people with spouses with low incomes. Here we’ve outlined the main ones and provided links to more information. Some of these will take a bit of time to organise so if you decide to do something it’s a good idea to get started now!
Oh, and if you aren’t a low income earner perhaps you have a spouse or a child or even a friend who is. Pass this information on to them to help them make the most of our superannuation system as we head toward the end of the 2017/18 financial year.
If you earned less than $37,000 this year
If you earned less than $37,000 this tax year (ie the year to 30/6/18) you may qualify for the Low Income Super Tax Offset. This tax offset is designed to ensure that low income earners don’t end up paying a higher rate of tax on their super contributions than they do on their take home pay. The payment is calculated as 15% of the pre-tax contributions made to your super fund up to a maximum of $500. The payment is made into your super fund. More information, including all the eligibility rules for the Low Income Super Tax Offset is available here
What does it mean?
If you earned less than $37,000 this year, make sure your super fund has your tax file number and if you are entitled to it, the government will make a direct payment of up to $500 to your super fund.
If your spouse earned less than $40,000 this year this tax year
The threshold for the tax offset for spouse superannuation contributions has increased. You can now qualify for a tax offset for a spouse that earns up to $40,000. The full offset of $540 is available for a spouse that earns up to $37,000 and reduces to $0 for a spouse that earns $40,000. More information, including all the eligibility rules for the tax offset for spouse contributions is available here
What does it mean?
If you have a spouse who earned less than $40,000 and they satisfy the other eligibility rules you might consider making a contribution to their superannuation fund to get the tax offset. This will help reduce the tax that you pay when you complete your tax return. You claim this offset when you complete your tax return by completing the relevant questions.
Get the superannuation co-contribution
If you, or someone in your family made an eligible personal super contribution during the year, their income was less than $51,813, they were less than 71 years old and they have less than $1.6m in super (let’s face it, most of us won’t have to worry about that last test!) they may be entitled to receive the government’s superannuation co-contribution.
If their income was less than $36,813, they make a $1,000 contribution to super and they satisfy the other eligibility rules they will get the maximum co-contribution of $500. The co-contribution phases out to $0 for income between $36,813 and $51,813. More information, including all the eligibility rules for co-contributions is available here
What does it mean?
If you meet the eligibility criteria you might want to make a voluntary superannuation contribution to collect the co-contribution and boost your superannuation savings. If you qualify for the maximum co-contribution getting an almost instant $500 return on a $1,000 contribution is great return! You might also encourage your kids to make a superannuation contribution (or give them the money to make one) if they satisfy the co-contribution eligibility rules.
This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) or the Australian Taxation Office.
Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.