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Welcome to the Small Business Treasure Chest. I have looked inside our chest again and found another two amazing super tricks to share with you.

Join me over the next few weeks to view other very helpful tips that will help you reduce your Income Tax for 2020.

This jewel again involves  Superannuation Contributions.

How would you like the government to contribute to your super? Sure you would!  We all would!

If your Taxable Income is less than $38 564 for 2020 and you make a $1 000 after-tax payment (from take-home pay) into super the government will contribute $500 as well. This is the maximum amount they will contribute.

The table below gives you examples of how much the government will put into your super fund based on your taxable income and amount you contribute in after-tax dollars.

Contributions made in the 2019–20 income year
Income Personal super contribution of $1,000 Personal super contribution of $800 Personal super contribution of $500 Personal super contribution of $200
$38,564 or less

$500

$400

$250

$100

$41,564

$400

$400

$250

$100

$44,564

$300

$300

$250

$100

$47,564

$200

$200

$200

$100

$50,564

$100

$100

$100

$100

$53,564 or more

$0

$0

$0

$0

 

The contributions you make in order to receive the government contribution are not tax deductible. If you want to claim a tax deduction then you can’t receive the contribution.

Remember that the super payment must be in the superannuation account by 30 June 2020.

The second trick in our treasure chest is about making super contributions into your partner’s superfund.

 

If you make contributions to a complying super fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) who is earning a low income or not working, you may be able to claim a tax offset.

You will be entitled to a tax offset of up to $540 per year if you meet all of the following conditions:

  • For income years prior to 2017–18 the sum of your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions was less than $13,800.
  • For 2017–18 the sum of your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions was less than $40,000 and the contributions were not deductible to you.
  • For 2018-19 and later income years, the sum of your spouse’s assessable income (disregarding your spouse’s FHSS released amount for the income year), total reportable fringe benefits amounts and reportable employer superannuation contributions was less than $40,000 and the contributions were not deductible to you.
  • The contributions were made to a super fund that was a complying super fund for the income year in which you made the contribution.
  • Both you and your spouse were Australian residents when the contributions were made.
  • When making the contributions you and your spouse were not living separately and apart on a permanent basis.
  • For 2017–18 and later income years your spouse had either:
    • not exceeded their non-concessional contributions cap for the relevant year
    • a total super balance equal to or exceeding the transfer balance cap immediately before the start of the financial year in which the contribution was made (the general transfer balance cap for 2018–19 is $1.6 million).

     

You can claim the maximum tax offset of $540 if:

  • you contribute to the eligible super fund of your spouse, whether married or de facto, and
  • your spouse’s income is $37,000 or less.

The tax offset amount reduces when your spouse’s income is greater than $37,000 and completely phases out when your spouse’s income reaches $40,000.

The tax offset for eligible spouse contributions can’t be claimed for super contributions that you made to your own fund, then split to your spouse. That is called a rollover or transfer, not a contribution.

Example

Example 1 – eligible for the tax offset for super contributions on behalf of your spouse

Robert and Judy are spouses. Robert earns $19,000 in 2018–19 and Judy makes a $3,500 contribution to Robert’s super fund.

Robert and Judy meet the eligibility requirements. This means Judy can claim a tax offset in her 2018–19 tax return for the contributions she paid into Robert’s fund.

The tax offset is calculated as 18% of the lesser of:

  • $3,000 minus the amount over $37,000 that Robert earned (in this case, nil)
  • the value of the spouse contributions (in this case, $3,500).

Judy is entitled to a tax offset of $540, being 18% of $3,000.

 

Should you wish to discuss any of the above further, please send me an email to questions@accoladeaccounting.com.au  or give me a bell on 0421 824 137.

 

You can read about our other Jewels  HERE.