Since 1 July 2017, most of us can make voluntary personal contributions and claim a tax deduction up to your concessional contribution cap. Do you have room in this year’s cap to make a top-up contribution before 30 June 2021?
Concessional Contribution Cap?
The concessional contributions cap is the amount of money contributed to your super account at the concessional tax rate of 15%, which is a nice low rate of tax. In short, you can make/receive contributions up to $25,000 per year into your super at the concessional rate. These contributions can be made up of:
- employer contributions (including contributions made under a salary sacrifice arrangement)
- personal contributions claimed as a tax deduction.
The benefit of making personal contributions to super, instead of keeping these monies in your name, is the difference between your marginal tax rate (shown below), and the 15% contributions tax.
In percentage terms, and allowing for Medicare levy, each dollar contributed to super that saves you from your marginal rate of tax is akin to an immediate day one investment return (tax saving) of between 6% and 32%!
Want to top up more?
If you have made or received concessional contributions of less than $25,000 pa over the past few years you may be able to accrue these unused amounts this year (or in subsequent financial years).
2018/19 was the first financial year you could accrue unused cap amounts. Unused cap amounts can be carried forward for up to five years before they expire. To be eligible to make catch-up concessional contributions, your super balance at the prior 30 June must be below $500,000. An example below:
Do you want to discuss this further and see how you could use this strategy to grow your wealth? Book a FREE VIRTUAL COFFEE with us to see how we can help.