QLD Should I Claim Deduction on Superannuation Contribution?

[oceanearth]

I'm a small business owner but my income is designated as personal services income. I have an arrangement with the ATO to settle my tax at the end of each tax year. This year my income will be around $32,000 taxable, so I'm eligible for full pre-tax and after-tax co-contributions.

I'm about to put a lump sum into my superannuation, let's say $1000 - with my main aim to maximise the government co-contribution.

Option A is to put it in as pre-tax. I pay 15% tax return, but get it back from the government via the low income superannuation contribution. I pay no income tax on the $1000, saving $190 (19% marginal tax rate). Net benefit is $190 in my pocket. If I put that in my super instead the total amount is about $1190 in super contributions (ignoring the flow on effects for next year).

Option B is to make it an after-tax contribution, where I will pay around $190 income tax (19% marginal tax rate) on the $1000, but get $500 (50c in the dollar) government super co-contribution. Net benefit is $310 ($500-$190) all in my super. Total of $1500 in super contributions.

Seems like B is a no-brainer, but am I missing something here?

 

[Michael T]

This is something you need to speak to your accountant about, rather than being a legal issue.

 

[Smiley]

The answer is easy (in my view).

Salary sacrifice payments are more aimed at higher incomes. On an income of $32k, Option B appears to be the better view.

Make your post-tax contribution and make the most of the Gov't co. contribution which as you have noted is now only 0.50 to each $1 you put in.

PS If you are aiming to have the $1k before the EOFY, do it now. Don't wait until 28/06/2016 and make it. This is to avoid any errors or anything that may pop up left of field that may cause you to miss the 30/06/2016 cut off

 

[oceanearth]

Thanks Smiley, it just seemed too easy so I wanted to make sure I wasn't missing anything.