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    From government contributions to tax deductions: how to boost your super like a boss this financial year

    June 12, 2020

June 12, 2020

From government contributions to tax deductions: how to boost your super like a boss this financial year

Did you know there’s a range of government co-contributions and refunds that you may eligible to receive to boost your super? Did you know that you can claim some super contributions as a tax deduction? We’ve put together some more info on three of our top super boosting initiatives out there so get you started:

1. You could get up to $500 from the government super co-contribution

PSA –  did you know the government is willing to stick in up to $500 into the super accounts of low- and middle-earners if they’ve made a personal after-tax contribution into the same account? Given many of us have taken a big hit to our earnings thanks to COVID-19 I suspect more and more of us will be eligible, a sliver of a silver lining I suppose.

Basically, if you put $1,000 into your super and you’re earning less than or up to $38,564 you’ll get the full amount. Viola $500, thank you very much! Earning more? The benefit works on a sliding scale so you’ll still get some money courtesy of the government but just not as much before it tapers off completely at $53,564. The amount of you get from the government depends not only on your income but how much you put into your super yourself, the ATO provides a good breakdown here if you’ want to check out more.

As a quick example if your total income is $38,564 or less for this financial year, the government will give you $0.50 for every dollar you put in, up to a maximum of $500. So if I made a total of $400 in personal contributions into my super, the government would chip in $200. If I put in $2000, the government would add $500 as that’s the max amount. Won’t say no to that!  

How do you get it? Thankfully it’s pretty straightforward, and you don’t need to specifically apply for the super co-contribution or lodge extra forms etc. But make sure your super fund has your TFN (which you need to give them to make a personal contribution anyhow). When you lodge your tax return, the ATO will work out if you’re eligible and will pay it to your super account.

IMPORTANT: If you claim any personal super contributions as a tax deduction (see point 3 below), you will not be entitled to a co-contribution from the government for those contributions. It’s like you have to pick one or the other, so make sure know which one will be best for you!

More info on the ATO website: https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-co-contribution/?anchor=Supercocontributionamounts#Supercocontributionamounts

2. Get up to $500 via the Low Income Superannuation Tax Offset (LISTO)

What is it? If you are eligible for the government co-contribution then you may also be eligible for the Low Income Superannuation Tax Offset (LISTO) – yep another acronym, sorry. If you earn $37,000 or less you may get up to $500 from the government that goes straight into your super. Essentially, LISTO is a refund of 15% of your total concessional (before-tax) super contributions (e.g. regular super contributions from your employer, or if you salary sacrifice).

Because LISTO is based on before tax contributions, it’s a bit different to the Government co-contribution described above, as well as having different criteria to be eligible.

How do you get it? Even better is that as long as you’ve lodged your tax return you do not need to do anything specifically to get the LISTO – like lodge a form with your super fund. The ATO handles it all and the extra contribution is paid straight into your super fund.

Here’s an example of how LISTO is calculated:

Michelle earns $35,000 in the financial year and also meets the other LISTO eligibility criteria. Her employer makes a super guarantee contribution of $3,325 into her super fund (35,000 x 9.5%). She also salary sacrifices $660 to super through her employer.

Therefore her total concessional contributions for the year are $3,985 ($3,325 + $660).

Michelle will receive the maximum LISTO amount of $500 as 15% of her total super eligible contributions are actually $598 ($3,985 × 0.15). But because the maximum amount the Government pays is $500 she won’t get the full $598.

More from the ATO here: https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Low-income-super-tax-offset/

3. Claim personal super contributions as a tax deduction

Yep, that’s correct. Personal after tax contributions can be claimed as a tax deduction! Who said that you only get benefits from super when you retire?

So, for example I’ve currently made $400 of contributions this year through Longevity App (obviously I’m using it 😉 ) so I can claim that $400 as a tax deduction in my tax return at the end of the financial year. While you can make personal investments into your super in other ways too, these top ups are helping me boost my nest egg for a better retirement and giving me a bit extra in my tax return which is a double bonus!

How to get it: for this one you will need to fill out a Notice of intent to claim or vary a deduction for personal super contributions (NAT 71121) form and submit it to your super fund (your super fund sometimes send one out to you at tax time too which is handy).

There’s a few things to keep in mind, so make sure you have a good read and talk to your accountant if you have one. For instance, there’s a limit on how much you can put into super as a pre-tax and/or concessional contribution (which is what they become if you claim personal contributions as a tax deduction). Currently the max is $25,000 a year and this includes the money your employer puts directly into your super account (aka the Super Guarantee) – so check that first or you can get whopped with extra tax by your super fund. And as already noted in point 1 above, you may be better off receiving a government co-contribution instead if you’re eligible.

More ATO info here: https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Claiming-deductions-for-personal-super-contributions/

As you can see, it’s always worth looking around for more ways to get better bang for your buck and there’s certainly some good initiatives around super. As a final tip if you need to make any extra contributions to be eligible etc do it sooner rather than later in case it takes a while to get sent into your super account.

Happy super boosting and stay safe!

General Advice only: the information contained in this article is general in nature and has been prepared without taking into account your financial objectives, situation or needs.