Super Contributions Tax

Discussion in 'Superannuation, SMSF & Personal Insurance' started by John Smith, 23rd May, 2021.

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  1. John Smith

    John Smith Well-Known Member

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    Hi all. Could someone please enlighten me on the rate of taxation I incur when I salary sacrifice money into super, then early in the next financial year, split my contributions into my wife's super account? I know that there is 15% tax on my salary sacrifice, but when the money is moved into her account, is it all my contributions from the previous financial year less the tax I have already paid, or is there extra tax to be paid?
    Also, if I my contributions including S.G. were less than 25k, and I decided to make a personal contribution to get me to the limit, does this contribution get taxed at 15% also?
    Thanks
     
  2. dave80

    dave80 Well-Known Member

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    You pay your 15% and it’s effectively treated as a roll over for your wife so attracts no tax upon receipt. You can only roll over 85% of your contributions or max the cap ie 21250
     
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  3. John Smith

    John Smith Well-Known Member

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    Thanks Dave. I suppose it would have been outrageous to think it would have been taxed twice.
     
  4. datto

    datto Well-Known Member

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    The highest marginal tax rate plus Medicare levy is outrageous. Then there’s gst, cgt, fuel tobacco wine.....levies, luxury car slug....no wonder we’re struggling in the Druitt.
     
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  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    All concessional contributions are taxed at a base 15%.

    It would also be wise to check your catch up cap limit as $25K may or may not be your cap. Frankly I dont get spouse contributions transfers. It is just moving $$ from X to Y. If she is younger it may allow earlier access.
     
  6. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Useful if one spouse has reached the 1.6M (soon 1.7M) transfer balance cap?
     
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  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes that is the other exception. In many cases both have moderate balances and are merely wanting to equalise balances.
     
  8. John Smith

    John Smith Well-Known Member

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    Yes, I have reached the limit therefore I boosting my wife's balance. On a similar note, if I drawing down an income stream via a super pension account but also have some leftover funds in an accumulation account, can I still make a personal contribution of $27500 in 21/22 financial year to access a tax deduction?
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Care must be taken by person who have "maxxed" their TBC (transfer balance cap) as this prevents non-concessional contributions. It is necessary to be very accurate with concessional entitlements as a error in that could mean it is then a excessive NCC. It needs financial advice specific to the member. That advice should also address IF you can access the indexed cap or not. This would allow a member to access some of the increased indexed cap. Its rather complex for here. May than allow the existing accum + contribution to increase the pension balances in total to under $1.7m.

    The only limits to a deduction are
    - Expected taxable income after the contribution (best to not be under 21K approx and should NOT create a tax loss !!) This is a NCC excess cap issue.
    - Timing of a spouse transfer
    - Age
    Being maxxed on the pension TBC desnt stop accumulation amounts that are concessional contributions

    Another strategy is consider how and if transfer of taxable income to the spouse can occur. Then wife can make the CC herself and it bypasses the transfer issue.
     
  10. John Smith

    John Smith Well-Known Member

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  11. John Smith

    John Smith Well-Known Member

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    Wife doesn't work so there is no tax benefit to be had for her putting in CC's. Her NCC's will be maxed out in July using bring forward rule with money withdrawn from my accum account, and I just wanted to add extra money into super environment due to it's favourable tax treatment.
     
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  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The other issue is your wife could own non-super investments and its tax free of course and without fees (albeit a smsf tends to have a largey fixed cost structure). Just because super is tax free doesnt mean there is a need to use and maximise super. Her super account may be quite redundant. Personal investment assets can produce $20K+ of income and still be tax free.

    eg Betty could own $1m of CBA shares and still have a tax refund.

    Also beware of the 1 day tax trap (or more days !!) which can be hidden cost. If $$$ is contributed on 25 June and Betty doesnt get a pension started until 1 July it means a % of the fund annual income is exposed to tax on earnings despite Betty's new money not earning any income in those few days. eg If you had a pension period CGT profit of $100K then Betty will receive a pro-rata share of the CGT amount. And you cant use segregation to stop it. I would usually recommend a pension is started on the same day that contributions occur to limit that.
     
  13. John Smith

    John Smith Well-Known Member

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    Thanks for your input Paul. Lots of things to consider.