How to save on tax with Super
JUNE 30th is fast approaching which means the focus will be on saving tax by making contributions to super.
There are two types of contributions - those for which somebody claims a tax deduction, and those for which nobody claims a tax deduction. The latter were originally called "undeducted contributions" but are now known as "non concessional contributions".
There are limits to the amount of concessional contributions that can be contributed each financial year - they depend on your age.
Suppose you work for XYZ Limited and they pay $4,000 a year in superannuation for you. This is a tax deduction for them. You voluntarily add $2,000 to their contribution so the total contribution made on your behalf for the year is $6,000. Unfortunately, the regulations prohibit you from claiming a tax deduction for your own superannuation contributions if your employer is contributing for you, so your $2,000 becomes a non concessional contribution.
You cannot claim a tax deduction for your own super contributions if an employer is making contributions for you, but there are many people, such as the self-employed or retired, who do not have employers paying superannuation for them and are allowed to claim a tax deduction for their own contributions. The amount of the deductible contribution (concessional) is limited to $25,000 a year per person, but those aged 50 and over can make total concessional contributions of $50,000 until June 2012.
There is a limit of $150,000 on the amount that can be contributed in any year but a person aged less than 65 can bring forward three years contributions and contribute $450,000 in one contribution. Of course, having done that, they cannot make any further non concessional contributions for three years.
Keep in mind there are severe penalties for exceeding the contributions limits and they may be reduced after 30 June.