Catch-up Tax Deductible Concessional Super Contributions
Important message for our clients with less than $500K in Super
We have given advice to several of our Financial Planning clients regarding “catch up concessional contributions”, which has resulted in large financial benefits to them on lodging their tax returns.
To ensure all our clients are aware of the potential financial benefits available under this rule we provide the following information.
If you have a superannuation balance under $500k you may have the opportunity to
contribute a large amount of money to your Super Fund and receive
a significant individual tax refund in the year the contribution is made.
For example:
- Tom Jones, (not his real name), has $495,000 in his Superannuation Fund as 30th June 2023.
- As he has less than $500,000 in super, Tom is allowed to make catch up contributions to the allowable concessional (deductible) amount, for each of the past 5 years.
- Tom has annual salary of $100,000 plus employer mandatory superannuation contributions per below.
If Tom were to maximise his super contributions, his 2024 Tax Return will have a taxable income of $100,000 less the additional superannuation contribution of $81,000, which will be claimed as a tax deduction. This would result in all his withholding tax paid on his wages being paid back to him as a tax refund.
The refund would be approximately $24,000. The superfund will pay tax on the contribution made of 15%, ie $12,150. The overall tax saving would be about $11,850.
This strategy is very helpful as a tax reduction strategy if you have a large tax event in a particular year, such as a capital gain event, or you have a financial plan that includes further contributions to your Fund, and you utilise this contribution strategy.
As mentioned, your current superannuation balance must be under $500,000 and you must complete and lodge a notice of intent to claim the deduction with your Super Fund.
Please contact our team for guidance on the amount you can claim, and the procedure to be followed, and you may wish to talk to us about a financial plan that may incorporate such benefits as the “Catch-up concessional contribution strategy”.
