Super strategies to help you prepare for the end of financial year

Salary sacrifice

Personal tax-deductible contributions

Make sure you check with your employer to see whether salary sacrifice is available.

Some of the benefits of salary sacrifice are:

• It’s simple, automatic and consistent.
• You can reduce your taxable income.
• Salary sacrifice contributions are paid from your before-tax salary and are generally taxed at 15% instead of your marginal rate (plus Medicare levy).² Note: there are limits to the amount you can salary sacrifice without incurring extra tax.
• The difference in taxation may mean more money is available to invest in super than if you were to receive the money as after-tax income and then invest it.
• Future earnings on contributions made to super are taxed at a maximum of 15%, whereas any earnings on investments outside of super may be taxed at a higher rate, depending on your taxable income.

Personal deductible contributions count towards your concessional contributions (CC) cap, which is $27,500 for the 2022–23 financial year.

You may be able to contribute even more if you did not fully utilise your CC cap in a year (from 1 July 2018 onwards) and are eligible to carry those unused amounts forward to use in a later year. To be eligible your total super balance must have been less than $500,000 at the end of the prior financial year.

Making personal tax-deductible contributions to your super may prove timely if you have made a considerable capital gain from the sale of a property or shares, as your deductible contribution may help to offset your assessable capital gain and could also reduce your marginal tax rate.

For this strategy to be effective, you need to have sufficient taxable income to offset with the personal tax-deductible contribution. Talk to your financial adviser about the best way to implement this strategy.

Split super contributions with your spouse

Spouse contribution tax offsets

If the receiving spouse is over preservation age but under age 65 at the time of the split request, they must declare they aren’t retired. Splits cannot take place once the receiving spouse turns 65.

Here’s how splitting your super can help:

• Transferring contributions to an older spouse could enable them to access more retirement money earlier.
• Transferring money to a younger spouse could enable the older spouse to receive more Age Pension by delaying the date their super becomes an assessable asset for Centrelink purposes.
• The transferred amount doesn’t count towards the receiving spouse’s contributions cap.5
• Transferring contributions to a spouse may allow a couple to equalise their balances and maximise the combined amount they can use to commence tax-free pensions, as each of them is limited by a transfer balance cap (currently $1.7m but will be indexed to $1.9m on 1 July 2023).

Super splitting is not offered by all funds, so you will need to check if your fund offers this feature.

As well as increasing your spouse’s super balance, another advantage of making a spouse contribution is that you may be eligible for a tax offset, which reduces the tax you pay on your own taxable income.

If your spouse’s assessable income, reportable employer super contributions and reportable fringe benefits are under $37,000 p.a., you may receive an 18% tax offset up to the first $3,000 you contribute on their behalf (i.e. there is a maximum tax offset of $540 p.a.). The offset operates on a sliding scale and phases out to zero once your spouse’s income exceeds $40,000 p.a.

You can open a super account in your spouse’s name and make contributions from your after tax pay, or make the contributions to your spouse’s existing super account.