Tax on additional SMSF contributions

Discussion in 'Superannuation, SMSF & Personal Insurance' started by David H, 30th Dec, 2019.

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  1. David H

    David H Member

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    Hi, I am self employed and have a SMSF. As I understand it, I can make up to $25,000 per year additional personal contributions to my super fund. How does tax work for this type of personal contribution? I am worried it will be taxed twice.

    For example, if my annual income is $100k, and I make a $20k personal contribution. I think this $20k is taxed in my SMSF at a ‘concessional’ rate of 15%. But, what about my $100k income, will it be reduced to $80k taxable income(the $20k taken off my taxable income)? Or do I still get taxed on the whole $100k, in which case my personal contributions is taxed twice?
     
  2. sash

    sash Well-Known Member

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    Yes you can...but if you go over 250k in income you will an additonal 15% surcharge.

    So if you are on the 32%..marginal rate you are better off by 17% tax wise...
     
  3. David H

    David H Member

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    Hi, thanks for quick reply! So, in my example of 100k income, and 20k personal contribution, will total tax be:
    • 20k gets added to SMSF taxable income, and taxed at 15%
    • My 100k taxable income gets reduced to 80k, so I do not pay any tax on the 20k personal contribution?
    So, the 20k is only taxed 15%?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You can generally claim a deduction now for contributions to super. So your taxable income would drop to $80k
     
  5. sash

    sash Well-Known Member

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    Yes that is correct as you are well under 250k income surplus.

    So on the 10k for 80-90k your tax would have been 32.5% tax rate (no Medicare levy)...you would have paid 3250 tax...so tax savings is about $1750.

    On the 10k 90-100k..you tax rate would have been 38% (inc medicare). ..youl have paid 3800 tax so a savings of 2300.

    So total tax savings of $4050...give or take. I am not a tax consultant but it gives you an idea..

    On the 10k for 90-100k you wil have
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Yoda you are quoting are you not?:D
     
  7. SatayKing

    SatayKing Well-Known Member

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    Have a play around with this calculator. Clear the superannuation field so it is blank. Then enter your current gross income, then say $80k gross (20k deductible for super) and look at the difference in tax. May not be accurate to the exact dollar but it'll give you are reasonable guide.

    pay calculator
     
  8. David H

    David H Member

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    Thanks so much for all the very useful and super fast replies!!!
     
  9. euro73

    euro73 Well-Known Member Business Member

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    Not quite right...


    Screenshot 2019-12-30 17.23.53.png


    PLUS 2% Medicare Levy - unless you meet the requirements for medicare levy exemption

    Screenshot 2019-12-30 17.25.50.png


    PLUS potentially a Medicare Levy Surcharge on income above 90K ...


    Screenshot 2019-12-30 17.29.58.png


    But yes, conceptually at least, if you sacrifice 20K of your salary as superannuation contributions, your taxable salary would reduce from 100K to 80K and the 20K of additional contributions would be taxed at 15% rather than the applicable marginal tax rate - provided the total contributions you paid were under $25,000 for the year . So with a base of 100K , if your employer pays you $9500 super, you would probably be looking at more like $15.5K of salary sacrifice...so your taxable salary would become 84.5K and your super would be 25K... but you could also look at spousal contributions depending on your partners income and superannuation contributions..... plenty of Govt employees get 15 or 16% super under their agency or departmental development agreements for example... so someone employed in one of those roles and on 100K that would be getting 15 or 16K of super and the amount of sacrificing available under that arrangement might only be 9 or 10K before they reached their 25K contribution limit .... so horses for courses.
     
    Last edited: 30th Dec, 2019
  10. sash

    sash Well-Known Member

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    Draws his life sabre...and off with your head knave... :p:D
     
  11. Never giveup

    Never giveup Well-Known Member

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    Hi Team,

    as per ATO website when I go to Super it has the following:-
    upload_2022-1-20_16-44-32.png upload_2022-1-20_16-44-32.png
    My question is that do I need to pay any TAX (15% etc.) if I want to put whatever amount is written in front of "Unused concessional contributions cap available to carry forward" into my super fund?

    Also, Does this amount also covers total of 3 years contribution (bring forward) ? or that will be separate?

    Appreciate the guidance!
     
  12. Ross Forrester

    Ross Forrester Perth business advisor and founder

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    If you make concessional contributions to your super fund you will incur income tax at the rate of 15%. It does not matter if those contributions counted to the current year cap or if you used the ability to catch up on prior unused thresholds.

    Depending on your income you might also incur the surcharge.

    The "bring forward" thing you refer to is most likely relating to the tax limitation on non-concessional caps. And the ability to use prior year unused caps for concessional contributions is not connected on the ability to bring forward future non-concessional caps.

    And tax is only one factor you should consider before making a contribution. Their are a range of other factors like investment fees, forecast investment returns, investement risk etc. And you need a licensed investment advisor to help on that.
     
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  13. Never giveup

    Never giveup Well-Known Member

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    Thank you Ross, appreciate it!
     
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  14. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Tax deductible contributions can be a strategy but preservation, age and other non tax factors will be important. And what the smsf invests in too. There may be no benefits of making huge contributions of concessional if it produces no tax benefit. Any concessional contribution is limited by the taxpayer income as well as caps and cashflow.