Hi, it’s Neil here again at Mansfield
Financial Planning. In my video last week I talked about the possibility of making
a tax-deductible contribution to your superannuation and how you might go
about doing that. This week I want to give you a bit more of an example of why
you might use this strategy and the potential tax savings that it offers.
So let’s get into it! OK, so let’s look at this example. We’ve got John who’s recently sold
an asset and he meets with his accountant His accountant does the
sums and informs him that he’s got a 17,000 capital gain on the asset. Now John’s income is pretty high at 200,000 which means his marginal tax rate is 47%
including Medicare levy. So on the capital gain of 17,000 he would pay 47% tax which would equate to $7,990 John’s not too happy about this so he decides to seek financial advice.
Following some recommendations John decides to dig into his savings a little
bit and take 17,000 out of there and make a tax-deductible contribution to
his super fund. The super fund taxes this contribution at 15%, but
the key here is that the $17,000 is a tax-deductible
contribution which means it’s offset against the capital gains tax liability,
effectively reducing it to zero. So what does all this mean? Well there’s a tax saving on the capital gains of $7,990 The super fund still pays some tax of $2,550 but the overall net tax saving to
John is $5,440. So as you can imagine John is pretty happy 🙂 So that example showed how you can use a contribution to super to effectively
offset a capital gains liability that you may have incurred. But even without
capital gains, if you’re on a middle to high income chances are that you’ll get
some tax benefit from making a tax-deductible contribution to
super. Bear in mind though that as with all superannuation you won’t be able to
access that money until you meet what’s called a condition of release, usually at
age 65. If you would like to discuss your situation and how a contribution to
super might benefit you please do get in touch. Next week I’ll be talking more
about non-concessional contributions to super. So make sure you tune in for that
and I look forward to seeing you then