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.

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Tony Dimitriadis