The One Page Financial Plan by Sam Henderson

Author:Sam Henderson
Language: eng
Format: epub
Publisher: Wiley
Published: 2013-02-21T16:00:00+00:00

Concessional contribution

A concessional contribution is a superannuation contribution made before any tax has been deducted from your income. It was previously known as a deductible contribution and is sometimes informally called a pre-tax contribution. If you make a concessional contribution to your super, your fund deducts 15 per cent tax. Concessional contributions include salary-sacrifice contributions and tax-deductible contributions for self-employed people who earn 10 per cent or more (the 10 per cent rule) of their earnings from self-employed activities. The difference is that employees cannot make lump-sum concessional contributions, unless they earn a bonus — they have to make their contributions as they earn their income.

If you earn more than $277 778 per year (lucky you!), then your super guarantee contributions will be capped: that is, your employer doesn’t have to pay you any more than $25 000.

Self-employed people have the benefit of leaving their superannuation contributions until the end of the year to manage their tax better.

If your highest marginal tax rate is more than 15 per cent, then it would be beneficial to put money into superannuation if you have spare cash.

How to reduce your CGT

If you are over the age of 55 and under the age of 65, and retired, you are considered to be self-employed as 10 per cent or more of your income will come from self-employment activities (simply because you will receive no income from employment sources). If you are selling a property or shares to move money into superannuation, you can reduce your capital gains tax (CGT) by contributing up to a $25 000 of the capital gain to superannuation.

If you are employed, you can make salary sacrifice contributions throughout the year to reduce the amount of CGT payable on the sale of an asset by maximising your concessional contributions and paying just 15 per cent tax on your income instead of 19 per cent, 32.5 per cent, 37 per cent or 45 per cent tax: a saving of up to 67 per cent!

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