From 1 July 2024, the annual limit on tax-deductible contributions to your superannuation fund will increase by $2,500 from $27,500 to $30,000.
These concessional or tax-deductible contributions include the sum of;
- Compulsory employer superannuation payments or the superannuation guarantee contributions
- Salary sacrifice contributions
- Personal tax-deductible superannuation contributions
When your salary sacrifices superannuation contributions or makes personal tax-deductible superannuation contributions to your superannuation fund, these contributions will be recognised as income in your superannuation fund, and the contributions are effectively taxed at 15%. However, by making these contributions, you will receive a tax deduction or benefit equal to your marginal tax rate.
For example, if your taxable income is between $45,000 and $130,000 per annum, you will receive a tax benefit of 30%. So, if you contribute an additional, say, $10,000, the tax benefit in your 2024 income tax return will be $3,000.
If your taxable income is between $135,000 and $190,000, the tax benefit is 37%, or $3,700. Over $190,000, it is 45%, hence $4,500.
Therefore, the higher your taxable income, the greater the tax benefit of maximising your tax-deductible superannuation contributions.
However, there will be no tax benefit where the sum of the superannuation guarantee or employer contribution plus the tax-deductible contributions plus the salary sacrifice contribution exceeds $30,000.
Other benefits of concessional contributions to your superannuation fund:
- Your earnings on investments within the superannuation structure will generally compound in value at a greater rate than investments held outside of super, as the tax rate on their earnings is usually lower.
- It pays to regularly make superannuation contributions on a monthly or yearly basis rather than leaving your retirement planning until your 50’s and 60’s.
- If you own an investment property or hold shares that have an unrealised profit, you may consider making personal tax-deductible superannuation contributions to reduce your capital gain tax liability.
Should you require further information in relation to superannuation, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.