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Last chance for $25,000 super deduction

For those with a super balance under $500,000, the 2024 financial year is the final year unused concessional contributions from the 2019 financial year can be applied.

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The concessional contribution limit was $25,000 for the 2018/19 year. If a portion of this limit wasn't used between 1 July 2018 and 30 June 2019, it could be carried forward for a period of 5 years where a super balance was under $500,000. Any contributions leftover from the 2019 financial year must now be used by 30 June 2024, or they will expire and be lost.

If no contributions were made in the 2018/19 year, this year is the final opportunity to add that extra $25,000 to superannuation and claim a tax deduction. If concessional contributions were not made over the past five financial years, an individual may be able to contribute and claim a deduction for up to $157,500.

Using carried-forward concessional contributions can be highly effective in reducing taxable income, particularly in years where income is higher than usual. This could be due to the sale of an investment property, receipt of a bonus or large capital gain from the sale of shares.

Taking this opportunity to catch up on unused contributions can be a worthwhile boost to a super balance.

Take the example of Matt – a professional earning a salary of $190,000 with unused carried forward contributions from the 2018/19 year of $10,000. Matt could make an extra contribution of $16,600 in the 2024 financial year, being the carried forward $10,000 plus the remainder of his current year limit after a super guarantee of $6,600. This contribution would lead to a tax saving of approximately $4,700 (after factoring in the 15% contributions tax), which is a return of 28% on his $16,600 investment.

Maximising deductible contributions in the wealth-building years is crucial to building a strong superannuation balance by retirement and can be tax-effective. When retirement is 15 to 20 years away, it can be hard to see the benefit of locking away savings in superannuation. The benefits of a solid tax deduction and longer-term planning can outweigh these concerns where cash flow allows.

A disciplined contribution strategy should be a key part of the overall wealth plan during the high-income earning years. A high income doesn’t necessarily equate to wealth – rather the ability to save and do something meaningful with those savings to determine wealth.

Superannuation is the most tax-effective place for wealth to be invested in retirement, as earnings are tax-free once a pension is established. Individuals can now have up to $1.9 million in a tax-free pension account (up from the previous limit of $1.7 million). A pension balance of $1.9 million equates to a tax-free income in retirement of $95,000 per year, based on a 5% drawing rate from age 65.

A consistent and tax-effective approach to building one’s super balance will ensure wealth can be built throughout career years in the concessionally-taxed super environment with that wealth being well structured in retirement years.

Tips to make the most of concessional contributions:

  • Check contributions history with your accountant or by checking myGov.
  • Catch up on unused contributions before your super balance exceeds $500,000.
  • Remember to lodge a notice of intent to claim a deduction notice with the super fund.
  • Consider Division 293 tax if personal income is expected to exceed $250,000.
  • Seek advice, as contribution rules are complex.

 

 

 

Lindzi Caputo
24 August 2023
smsfadviser.com

 

 
 
 
 
 

David Forrest Download David's Advisor Profile

David Forrest

Director
BEc (Acc), MBA, CPA, FFin

David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.

David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.

Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.

David maintains a strong personalised client service focus, providing tailored solutions for clients.

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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846

Michelle Forrest

Michelle Forrest

Business Finance Manager
B Bus (Acc), CPA

Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.

Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.

With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.

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Darren Chalk
Natasha Bartlett
Kelly Collins
Jasmine Smith

Jasmine Smith

Client Service Manager

Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.

Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.

Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.

Jasmine has gained her Certificate III in Financial Services qualification.

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Merrilyn Smith

Merrilyn Smith

Senior Client Service Manager

Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.

Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.

Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.

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