It’s six weeks and counting until the end of the financial year, which means you need to make any moves you can now to cut your tax bill.
There’s the regular stuff like pre-paying and bringing forward any expenses that will earn you tax deductions.
And delaying any income that you can into next tax year helps, too.
Read more from Nicole Pedersen-McKinnon:
However, there is a little-known but genius strategy for a family to cancel $540 of its tax bill.
Supe up your spouse’s super
Yes, it’s all about superannuation.
But while you may know about the co-contribution that nets the contributor a 50 per cent instant return into their super fund (up to $500 for a $1,000 after-tax contribution), the opportunity I’m talking about also gives a household hip-pocket relief at the time.
It’s a beautiful thing because it boosts your bottom line both immediately and in the future.
And it’s particularly useful where one person may be earning less than usual because they are taking on caring duties, either for children or elderly parents.
So what is the family strategy?
The higher-earning spouse simply contributes $3,000 after tax into the lower earning spouse’s superannuation fund.
Remember this is money your family will get back later. Indeed, hopefully it will have grown to far more.
Now, the recipient spouse needs to have an assessable income less than $40,000 a year – including reportable fringe benefits and reportable employer super contributions – to get the tax break.
But, again unlike with the co-contribution, they don’t have to be employed. The co-contribution is designed for people who are still making employment earnings.
This so-called spouse contribution is also available to families where one person is entirely out of the paid workforce for a time.
What you get and how
So, what will that $3,000 get you today? $540 lopped off the top of the payer’s tax bill.
This is known as a tax offset and because it’s a pure discount on your bill, extremely powerful.
The full discount will apply where the receiving spouse earns less than $37,000. It will phase out and disappear entirely at $40,000.
And that is the third great thing about this super and tax hack: It used to be cut when recipient spouses earned only $13,800.
But in a mass expansion of the program several years ago, the threshold was almost tripled.
Other qualification criteria include that the recipient has not exceeded their non-concessional contribution cap for the year – so the $110,000 allowed in after-tax contributions – and does not have a total super balance in excess of $1.7 million.
Don’t miss that you can make a spouse contribution each and every year… and it’s well worth setting the money aside to do so if you can.
That’s up to $540 wiped off your tax bill each and every year.
Better still, that’s $3,000 annually swelling the super fund of a person who – possibly because they’re working hard within your family – otherwise faces seriously depleted super… and a disadvantaged retirement.
It’s benefit upon benefit.
Here’s the form to calculate your potential benefit… and to apply.
If you can at all afford to, snare the spouse contribution tax offset for this and every tax year.