Supercharge Your Super With 5 Simple Tax Hacks

No-one likes life admin or filling out forms (we get it!) but if you follow these simple steps you could end up with big savings.  Here are 5 things that those in the know do (that you can too).

1. Check your funds

If you have a MyGov account, you will be able to see the details of your superannuation fund. (If you don’t have a MyGov account, your accountant will be able to see these details for you).

It is worth taking the time to make a quick check and ensure that you are across where your super is located (and invested).  This is important for a number of reasons:

  • Ensuring you don’t pay more money in fees than you need to across multiple funds.
  • If you have a fund that is inactive and hasn’t received a contribution in 16 months, your insurance premiums can be cancelled unless you instruct the fund otherwise. If you were keeping an old super fund in place to retain access to the life insurance, you could find your policy cancelled without you realising it.
  • Super funds are required to transfer low balance accounts that haven’t received active contributions within 16 months to the ATO (which may not be what you anticipated doing with your super money!)

2. Super Split

Many of our dental clients have worked as sole traders or in structures where paying super isn’t compulsory.  Whilst actively saving for your retirement is a smart idea, many people choose to build their wealth outside of super (especially in their early years). If you are in a couple where one of you is an employee and the other is self-employed, it is likely that you will have quite large differences in your superannuation balances. With the $1.9m transfer balance cap and proposed $3m cap to super, it makes sense to try and equalise both super balances across the couple so that you are effectively utilising both thresholds.

The ATO allows spouses (married or de-facto) who are under preservation age to split up to 85% of their concessional contributions each year across to their partner.  Note that the annual ($30k) contributions cap is still ‘used up’ by the person making the contribution. The benefit of super splitting is that you can equalise your super balances and ensure you are making best use of all the concessionally taxed super caps, but without having to contribute any additional cash into your super fund. Super splitting isn’t a ‘quick fix’ as you can only split the current year contributions, but it can make a big difference in the amount you get after tax in the long term.

If you are interested in reading more about this, the ATO has a helpful summary here: https://www.ato.gov.au/forms-and-instructions/superannuation-contributions-splitting

3. Insurance linked to your fund? Complete your notice of intent to claim form straight away

One of the most common ways that people hold their life insurance is within superannuation and this can be a tax efficient way to structure things. Where the life insurance policy is within a stand-alone superannuation structure, the annual premium will often be set up to roll out of your main superannuation fund.  Usually, this rollover arrangement is something your advisor will set up for you – so it will happen in the background without you needing to do anything.

If you hold your life insurance via a stand-alone super policy and you have made a concessional member superannuation contribution (a contribution you claim a tax deduction for), make sure that you submit your notice of intent to claim form as early as possible. Your super fund will only treat your contribution as concessional once they have received your form (i.e. prior to this they will assume you are making an after-tax contribution). If the payment for your insurance ‘rolls-out’ of the fund before you submit your claim form, a part of this roll-out will be taken to be from your latest contribution. This will limit the amount of super contribution you are able to claim as a tax deduction (as the contribution has now been rolled out of the fund). This also has flow-on consequences where you have maximised the amount of after-tax contributions you can make. Not only are your deductions limited but you could end up with additional (excess contributions tax) on the after-tax amount. Worst of all worlds!

4. Made a super contribution and expecting a refund? You’ll also need to complete your notice of intent to claim

If you needed an additional reason for lodging your notice of intent to claim form early, it’s this – it can delay you from receiving your tax refund.

ATO data matching is very good which means that you won’t be able to lodge your tax return with a claim for the super contribution until your super fund reports both the contribution (and lodgement of the claim form) to the ATO. The super funds are usually speedy at processing these forms, but the earlier you can submit your paperwork, the quicker you can get your refund turned around!

5. Ability to stream/split income? Make sure you factor in super

Where your combined adjusted taxable income and superannuation contributions are over $250,000, the tax on your superannuation contributions increases from 15% to 30% on the amounts over $250,000. For a lot of people who are subject to this additional tax, there isn’t a lot that you can do.  However, if your practice income (or investment income) is structured in such a way that you are able to stream profits, it is worth factoring in this tax when determining dividends and trust distributions.

For example, if you are in a couple where both parties earn more than $190,000 and there is flexibility in the way that profits are split, it is worth:

  • Trying to keep one partner’s income over $190,000 but less than $250,000
  • Allocating additional income to the partner who made the smaller super contribution

Getting this right can save up to $4,500 each year, just by being strategic around how you allocate income.

Conclusion

Nobody comes home on a Friday night and thinks “I’d love to review my superannuation this weekend”, but it could save you big money for a small investment of time.  It’s the easiest money you’ll ever make.

Author

Elissa Lippiatt – Chartered Accountant & Director

This article first appeared in the August 2024 issues of the News Bulletin, published by the Australian Dental Association https://www.ada.org.au/Dental-Professionals/Publications/News-Bulletin

This article is designed to provide generic information only and should not be viewed as a recommendation to act or financial advice. Individuals should seek advice from a qualified adviser to ensure their actions are commensurate with their financial needs and requirements. Whilst every effort has been undertaken to ensure accuracy of information at the time of publication, the information contained within the article may have changed prior to and subsequent to the article’s publication.

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