Hi all, I have just started working and have made about $300 personal contributions into my super so far. I was wondering if I should claim a tax deduction or would rather receive the super co-contribution from the government? My income is under $50,000.
Thanks.
for making a post tax contribution and then claiming as a concessional contribution
this has nothing to do with another person?
Disregard my above comment.
trojan horse, that would be incorrect.
+1
Specifically
https://moneysmart.gov.au/grow-your-super/super-contribution…
and
https://www.ato.gov.au/Calculators-and-tools/Super-co-contri…
Will tell you exactly whether to do as before tax or after tax
I would go with the co-contribution, you stand to get $100 extra in your super balance (not sure if co-contribution is subject to tax). Say worst case, the $100 co-contribute taxed in the fund @ 15%, leaving $85 extra in your super balance.
If you claim personal contribution deduction, you effectively reduce your taxable income by $300. Using $50k as your annual income, the effective tax rate is ~15.6%, meaning you reduce your tax liability $46.8, i.e. you'll get $46.8 for the $300 in your tax refund.
for me, $85 extra in super beats $46.8 in pocket, ymmv.
co-contribution is tax-free
confirmed
Do both
The co-contribution is not taxable. The ATO Co-Contribution Calculator suggests on a $50k assessable income a $300 personal contribution will get you $ 119. A concessional contribution of $300 will result in a reduction in your tax return of $ 108. Taking into account 15% tax on that contribution ($300 x .15) your overall benefit is $ 63. You're nearly twice a better off going with the Co-Contribution.
Don't claim a deduction as your effective income tax rate is under 15%
Effective tax rate is irrelevant, its marginal tax rate that matters as deduction comes off the top. Its 34.5% tax/refund at 50k. But yes, get 50% cocontrib tax free into super then claim the other $60 for a $20 refund ;o)
is relevant mate as you don't want a tax deduction for 15% if you are overall already paying income tax under 15% in the first place… especially when he is deciding to tax deduct or not
you got to count every dollar like a true ozbargainer instead of just focusing on the tax bracket
I dont understand. You are talking average tax rate but refund is applied on the marginal tax bracket he is in. The actual refund on $1 deduction at 22k V 42k V 92k is 0, 34c or 39c, not 15c. Like having 20% credit card and 5% home loan and saying average interest rate is 6% so CC doesn't matter. No, pay the CC off and save 20% on each dollar. The cocontrib is extra 50c per $1 so that's the best option but only to the max available for income level.
@Terbo: Co-Con is the best option we both agree
Your tax bracket deduction 34.5%, 39%, 47% is not wrong either. However actually tax or effective tax rate is most correct because you need to consider all offsets that are available to the person. So in general the bracket rate is ok but effective rate is being precise.
Effective rate is relevant I think is because if he is putting money in super as a personal contribution (an investment) and then deducting it making it concessional and it is going to cost him 15% in super contribution tax and if overall if he pays less than 15% in income tax on his taxable income. He would be better to invest that $300 in something else outside super to avoid the 15% super contributions tax.
Of course there is no argument here that the co-con is better.
I think what I'm trying to say is someone wasn't eligible for the co-con (free money always win). Then wouldn't be advising someone to invest in super and making a deduction unless the overall tax they pay is over 15%.
@Poor Ass: We'll have to disagree on this one. If he claims deduction and 15% tax applied in Super this is offset by refund of actual marginal tax rate paid, not avg tax rate. So at 34% he is guaranteed 19% in front on his investment into super rather than invest elsewhere personal after tax money. Age restriction sucks but compounding will do wonders.
A tax deduction for what?