A five minute ‘must do’ check before tax time

Here are a four things you can do now, before the end of financial year, that could save you thousands, but will only take a few minutes! If you want more info on any of these, please give our tax agent Tes a call today on 92673800.

1. Personal Super Tax Contributions

From 1 July 2017 the requirement that you derive less than 10% of your income from employment sources has been abolished and regardless of your employment arrangement you may be able to claim a tax deduction. Those aged 65 to 74 will still need to meet the work test in order to be eligible to make a contribution and claim a tax deduction.

2. Super Co-Contributions

Super co-contributions help eligible people boost their retirement savings.

If you’re a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government also makes a contribution (called a co-contribution) up to a maximum amount of $500.
The amount of government co-contribution you receive depends on your income and how much you contribute.

When you lodge your tax return, we will work out if you’re eligible. If the super fund has your tax file number (TFN) we will pay it to your super account automatically.
The way your co-contribution is calculated depends on the financial year in which you made your personal super contributions.

Income thresholds
There are two co-contribution income thresholds:
– a lower threshold ($36,813 for 2017–18)
– a higher threshold ($51,813 for 2017–18)

If your total income is equal to or less than the lower threshold and you make personal contributions of $1,000 to your super account, you will receive the maximum co-contribution of $500.

If your total income is between the two thresholds, your maximum entitlement will reduce progressively as your income rises. You will not receive any co-contribution if your income is equal to or greater than the higher threshold.

If your co-contribution is less than $20, we will pay the minimum amount of $20.

3. Spouse Offset

On 1 July 2017, the spouse income threshold increased, meaning more people are eligible to claim the tax offset for the 2017-18 and future financial years. You can claim the maximum tax offset of $540 if:
– you contribute to the eligible super fund of your spouse, whether married or de-facto, and
– your spouse’s income is $37,000 or less.

The tax offset amount will gradually reduce for income above this amount and completely phases out when your spouse’s income reaches $40,000.

You will not be entitled to the tax offset when your spouse receiving the contribution:
– exceeds their non-concessional contributions cap for the relevant year, or
– has a total superannuation balance equal to or exceeding the general transfer balance cap ($1.6 million for 2017–18) immediately before the start of the financial year in which the contribution was made.

Eligibility rules
The following eligibility requirements remain in place before and after 1 July 2017:

• both you and your spouse must be Australian residents when the contributions are made
• the contributions must not be made to satisfy a family law obligation to split contributions with your spouse
• the contributions must be made to a complying superannuation fund or a retirement savings account on behalf of your spouse
• you and your spouse must not be living separately or apart on a permanent basis when the contributions are made
• the contributions must not be deductible to you.

You can claim the tax offset for more than one spouse during a financial year if you satisfy the eligibility rules for each spouse. The tax offset is the lesser of the sum of the offset entitlement for each spouse, or $540.

To claim the tax offset, you need to complete the Superannuation contributions on behalf of your spouse question in the supplementary section of your tax return. You also need to complete Spouse details – married or de facto in your tax return.

4. Super Splitting

An individual can make concessional (before-tax) contributions to a super fund, including a self-managed super fund, and arrange to split those contributions with a spouse.

It is important to understand that if an individual is planning to split super contributions with a spouse, then the receiving spouse MUST be under the age of 65 and NOT retired. More specifically, the receiving spouse must meet one of two conditions: they must be under their preservation age, or if they are older than their preservation age, then they must be under the age of 65 and NOT retired

If you plan to claim a tax deduction for super contributions, then that notice to claim a deduction must be lodged BEFORE the super splitting declaration.

Summary

There are many ways you can improve your tax position, and we would love to help you do so. Please call Tes to book your tax appointment today on 9267 3800.