Are you a high wages owning employee or a self-employed business owner who paid too much tax last year? There is an effective way to reduce the tax liability by directing the income into your super. The before tax income paid into your super fund under the concessional cap ($30,000 for ages under 49 and $35,000 for ages over 49 in 2016-2017) will be only taxed at 15% which is much less than most people’s margin rate (37% for taxable income higher than $80,000). The amount of the income paid into your super is deductible to your total taxable income.
Example:
Tina aged 45 had a taxable income $100,000 for 2015. She directed before tax income $20,000 into her super fund. Therefore, she will be paying $3,000 tax at her super fund (15% on $20,000) and receive $17,000 in the fund. In turn, her taxable income will be reduced to $80,000 after deduction of the super contribution. Without this arrangement, she will be liable for $7,400 tax (37% margin rate on $20,000) plus tax on $80,000.
Now the result looks fantastic but how can we direct the income into our super fund? If you are a wages employee, on top of the Superannuation Guarantee your employer paid to your super fund (9.5% in 2016-2017), you can arrange salary sacrifice with your employer up to the concessional cap. Please note the Super Guarantee paid by your employer is also counted towards the concessional cap.If you are self-employed business owner, you can direct your taxable income at your discretion as long as it’s under the concessional cap.
Need Help?
If you are unsure whether your SMSF’s investment strategy still suits the fund, or whether it needs reviewing after a change such as a member starting a pension, Pitt Martin Group can help you review and document your strategy, weigh up diversification, liquidity and insurance, and prepare the evidence your auditor will expect.
As Sydney tax accountants, we assist trustees with SMSF compliance, investment strategy reviews and practical superannuation advice.
Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.
This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting and mortgage industry. Skilled in Tax, Accounting, Business Advisory, SMSF, Audit and Mortgage. Strong entrepreneurship professional with qualification Master of Professional Accounting, CA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.