The Top six questions that I receive from business owners in the lead up to 30 June Tax Year End – Question #3

Top Tax Question #3 – Should I pay some money into my superannuation?

Short answer: Yes

Detailed answer: You can contribute money into your superannuation by either concessional contributions (i.e. tax deductible) or non-concessional contributions (i.e. non-tax deductible). Concessional contributions are made from your business and are 100% tax deductible up to the contributions cap, which from 1 July 2017 is $25,000. If you utilise this cap and contribute the full $25,000, you will reduce your tax by the relevant income tax rate you are liable for.

In other words, if you are a small business for income tax purposes, you will now pay 27.5% company tax on your taxable income, therefore if you contribute $25,000 in superannuation, you will reduce your income tax payable by $6,875. Please note that any concessional superannuation contributions are taxed going into your superannuation fund at 15% ($3,750), therefore your overall tax saving in this example will be $3,125. The added benefit is that you now have $21,250 invested wisely and generating a you more money.

If you would like further clarification or have any other questions, please do not hesitate to ask us.

Did you know that I’m releasing my book on Business Financial Management to help businesses cross the chasm of Tax rules and laws to grow their lifestyle business? Take a look at www.buildit-book.com.au to find out when it comes out!

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Tony Dimitriadis