How can I reduce my taxable income with my superannuation contributions?
Hi, It's that time of the year where PAYG employees are looking at ways to reduce their taxable income.
My questions are:
1. What is the limit for Super Contribution?
2. As a working example, let's say an employee is paid $60,000 as a salary, could he/she nominate for his super contribution to be at the capped amount instead of the legislated 9% contribution? By doing this, would he/she reduce his taxable income?
3. Would the employer of this person be adversely affected by the above working example?
The concessional contribution cap for 2013 financial year is $25K. From 1/7/2013, this cap increases to $35K for people over 60 and from 1/7/2014 for people over 50. From 1/7/2018, everyone will be able to contribute $35K regardless of age.
From 1/7/2013, the compulsory SG is 9.25%. Based on the example and assuming you’re under 60, you can put in $25K where the amount above the 9.25% SG will be treated as salary sacrifice which is arranged between the employer and employee. The total $25K will be taxed at 15% and the reduced income of $35K will be taxed at the individual’s marginal tax rate.
There is no adverse impact on the employer for allowing employees to salary sacrifice that I am aware off. In fact, the employer may be able to claim a tax deduction on the SG and salary sacrificed contributions.