These two tax time moves could net you an extra $1040
We said goodbye to the first week of June; That means you have about two weeks to make two financial moves that will get you a free $500 on your pension or a $540 reduction in your tax. Or both.
I’m talking about great opportunities for low-income earners; One of these is called super contribution and the other is called spousal contribution.
Both require you to pay money, but the return on doing so is significant. Let’s start with the gift that requires the least amount of money: the super contribution. This is a free amount of up to $500 paid into your retirement by the federal government.
The two reasons to get it are a contribution of $1,000 after tax and an income of less than $62,488. If your income is less than $47,488, you get the full $500, which then gradually decreases until you lose $62,488 (in the 2025-26 tax year).
You also need to be working in some capacity to qualify: 10 percent or more of your income must come from employment (full-time, part-time or casual) or helping run a business (self-employment or contracting with an ABN).
And remember, the payment must come from you; Many people have asked me why their government contribution never showed up in their account, and it’s usually because a spouse or family member paid the money on their behalf.
Act now to take advantage of this year’s generous super gifts… and plan to do so every year you can from now on.
But yes, if you do it right, the contribution will be paid automatically after the end of the tax year.
This brings us to spousal contribution. This is again for an after-tax contribution, but you get a benefit here by paying up to $3000. Let’s not miss your reach. castle extra pension contributions – and these can significantly increase your retirement over time.
It’s also possible for your family to benefit from both a joint contribution and a spousal contribution, giving your ‘fun fund’ a double boost. But I’ll come back to this.
For a spouse earning less than $37,000, the full contribution of $3,000 would net the taxpayer a $540 tax offset. This is a big savings because it is not a tax deduction but a tax discount. When income reaches $40,000, the offset goes from $540 to zero.
There are only two final eligibility requirements for both spousal and joint contribution super privileges; ones that are probably not difficult.
First, you (or your spouse, in the case of a spousal contribution) must have a superannuation balance of less than $2 million on June 30 of the previous tax year (this is called the general transfer balance cap).
Secondly, you or your spouse must not have exceeded the non-concessional (after-tax) contribution limit for that year. That’s $120,000 this year and $130,000 next year.
And for families, especially if one person is doing less paid work (perhaps to work more at home caring for the kids!), the benefits of both programs together can be huge.
Those taking time off from paid work are still mostly women, and the Super Members Council says the average super balance for a woman in her early 60s is around $51,000 less than for men (this damage is compounded by the gender pay gap).
Although paid parental leave will now attract super, it’s just a payment at the minimum wage (two weeks longer, at 26 weeks, from 1 July) and so won’t make a huge difference.
But two super boosters given each year can help greatly. Generally, the annual contribution is $1500 from the total super contribution and joint contribution and $3000 from spousal contributions plus immediate family tax of $540.
Remember, to benefit from either super strategy, you must still be earning (the 10 percent rule) and have an income under $40,000. Meanwhile, July 1 marks a change for everyone that will also help preserve and build the superpower.
Payday super means you’ll finally get your retirement benefits as you earn them. Employers currently have three months to deposit pension benefits and it’s easy not to (if your employer has paid you insufficient pension benefits or paid you late, call the ATO’s tip line on 13 10 20 or online tool).
So why not make plans to make sure you get your husband and wife’s contributions next year too, as they will be made automatic from the start of the next tax year?
Automate a regular savings plan – Spread out over 52 weeks, you’ll have the $1,000 needed to get the $500 free co-contribution with just $19.25 per week in regular savings.
And even collecting the full $3,000 for the spousal contribution and the $540 tax offset would only take $58 a week. Also note that you do not have to pay these full amounts; You will receive a gift or tax deduction on the amount you can manage, up to the maximum amount.
Income thresholds for co-payments are also indexed, with a low of $49,293 (for the full $500) and a high of $64,293 (where the payment stops) next year.
If you can, act now to take advantage of this year’s generous super gifts… and plan to do so every year you can from now on.
Nicole Pedersen-McKinnon is the author of: How to Get Mortgage-Free Like Me?Available at: nicolessmartmoney.com. follow him Facebook, X And instagram.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
Expert tips on saving, investing and making the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.
