Want to pay less in taxes while securing your future?
Superannuation, Australia’s retirement savings plan, has a cool trick for personal deductible contributions. Let’s break down how it works, especially when combined with catch-up concessional contributions, to help you save on taxes. In this blog post, we’ll explain personal deductible contributions, the cap on contributions, and the catch-up contribution rule.
Understanding Personal Deductible Contributions
Personal deductible contributions mean putting your own money into your super fund and claiming it as a tax deduction. This is great if you expect to earn more this year or make money from selling something.
Concessional Contribution Cap
As of 2023/24, the cap on contributions is $27,500. This includes contributions from your boss and money you set aside from your salary. Going over this limit can lead to extra taxes.
The Magic of Catch-Up Concessional Contributions
Catch-up contributions let you use any unused contribution cap from the past five years. You can go over the yearly limit, but your super balance should be below $500,000.
How Catch-Up Contributions Work
It works like a line—an unused cap from the oldest year gets used first when you make extra contributions. It’s a smart move for years when you make more money, like selling something and getting a big profit.
Imagine you sold something and made a lot of profit. With catch-up contributions, you can use the unused cap from previous years to make more considerable deductible contributions. This lowers your taxable income and cuts down your overall tax bill.
Get Professional Advice
Before trying these tricks, talk to a pro. Doing it wrong might mean losing deductions or paying extra taxes for exceeding the contribution limit.
Using super contributions, especially personal deductible and catch-up contributions, can be a great way to pay less in taxes. Stay in the know, get advice, and use these tricks wisely to make your financial future better. Remember, understanding these ideas and using them the right way is the key to saving more money.