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Maximise Your Super and Slash Your Tax Bill: The Power of Prepaying Contributions



Imagine waking up on 1 July 2024 knowing you've slashed your tax bill and supercharged your superannuation. Sounds too good to be true?


It isn't.


Thanks to the Commissioner of Taxation's guidance, businesses and taxpayers can now prepay deductible and after-tax contributions into superannuation funds without facing penalties. This strategy not only reduces tax liabilities but also maximises the funds invested in a low-tax environment.


Let's break it down. Typically, taxpayers make their super contributions through direct contributions, salary sacrifice, or personal deductible contributions. This caps out at $27,500 for concessional contributions for the 2024 income year but come 1 July it is $30,000. But here’s the kicker: you can prepay next year’s contributions. For instance, you can claim a $27,500 deduction for this year and prepay $30,000 for the next, giving you a hefty $57,500 tax deduction in a single year.


How Does It Work?


Prepayment Case Study

Take John Smith, a 45-year-old plumber whose business is booming. John has spare cash and wants to maximise his super. Normally, he would contribute $27,500 and call it a day. However, his savvy accountant advises him to prepay the following year’s $30,000 concessional contribution cap. By doing this in June 2024, John claims a $57,500 tax deduction. His accountant records in his super fund's return $27,500 for the 2024 income year and parks the $30,000 in an ATO-approved contributions suspense account until the 2025 income year. This strategy ensures John maximises his contributions without breaching the cap.


Timing is Everything

This strategy only works in June of each financial year, as contributions can be held in a suspense account for a maximum of two months. It’s also viable for after-tax or non-concessional contributions, allowing super fund members to contribute over $480,000 under certain conditions.


Who Can Benefit?

Whether you’re an employee with a high salary, a salesperson with substantial bonuses, a family trust beneficiary, or someone with capital gains from selling shares or property, this strategy is for you. Essentially, anyone up to the age of 75 with taxable income can benefit.


Want to Pay Less Tax in 2024?

If you’re intrigued by the potential tax savings, consider a no-cost strategy discussion with us. We’ll dive deep into your super and taxes to see how this strategy can benefit you, and provide a quote for implementation. Remember, it's your choice to save tax or not. Unfortunately this only works with SMSFs not retail or industry super funds as they dont have the systems for it.


By leveraging this smart and legal strategy, you can take control of your tax liabilities and boost your retirement savings—truly a win-win. For detailed guidance and a deeper dive into the specifics, consult the experts at Abbott and Mourly Lawyers, who can provide personalised advice tailored to your situation.


Contact Anoushka - nush@abbottmourly.com.au

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