- March 15, 2024
- Posted by: legaleseblogger
- Category: Related News
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Financial Advice and Considerations for Superannuation Concessional Contributions
Hello everyone,
I am a 29-year-old male seeking some financial advice and discussion regarding whether I should make additional superannuation concessional contributions this financial year. Recently, I have started private contracting in engineering for a private defense company, which has resulted in a significant increase in my earnings.
By the end of this financial year, I anticipate earning around $230,000 in taxable income. I have approximately $70,000 of available super concessional cap from the past five years. I am contemplating contributing all of my taxable income above the 45% tax rate (amounting to $180,000 this year, approximately $50,000) into super.
This strategy could potentially result in a tax return of around $22,500, effectively reducing my tax liability by approximately $15,000. While we are not in dire need of the lump sum, utilizing it for super contributions would come out of our mortgage offset and delay our plans of acquiring an investment property in the future.
I am uncertain whether it is worthwhile to part with such a significant amount of money for the next 35 years solely to save on taxes. I am concerned that locking myself into this strategy may prevent me from exploring potentially better uses of the funds between now and retirement.
The AI Legalese Decoder can assist in analyzing the complex legal language and regulations surrounding superannuation contributions, helping to determine the most beneficial course of action. Additionally, it can provide insights into the long-term financial implications of different investment strategies, aiding in making an informed decision.
I acknowledge that this query may differ from the typical posts in this forum, which often address lower-income situations. However, I am hopeful that engaging in this discussion will provide valuable insights to guide my decision-making process.
Thank you for your input and advice on this matter.
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At the 47 percent tax bracket it’s really hard to beat the immediate 32 percent saving plus lower tax within super. I’d do it personally.
When you say you ‘plan’ to get an IP one day, what’s the objective of that plan? Is it diversification of assets or a hedge on helping a future kid to get into the housing market ( that was our logic, although in our case kids were real).
Have you crunched the numbers of concessional super vs IP?
You are in the tax bracket that takes full advantage of the nonsensical superannuation contribution tax concession rates, so it makes very little sense to not maximise your contributions.
The tax savings constitute an immediate risk-free ~60% return, and you’ll be taxed <15% on the investment earnings until you reach preservation age ($3m cap not withstanding). An IP just can’t compete.
I would go for it. Immediate tax savings and compounding benefits of gains being taxed at a lower rate. Even if you don’t do it every year, putting this lumpsum in now means you’re giving yourself a boost.
I take it that youÔÇÖre completely self employed, that you arenÔÇÖt receiving any super guarantee payments at the moment, and that the $230k taxable is the absolute max for your income?
Because you may want to keep in mind that concessional super contributions are subject to an extra 15% tax if you exceed the DIV293 threshold. Based on what you said I donÔÇÖt think it shouldnÔÇÖt be an issue, but if your income and super contributions does exceed $250k then you may be subject to the tax.
check how much div293 you need to pay. Will still be a tax benefit but you won’t get the full difference.