A New Financial Year Brings 3 New Opportunities
It’s a joyous time at Naked Wealth as we have survived yet another busy end of financial year period. Now as money nerds, it also brings us some joy to share with you the 3 main changes that occurred as the clock struck midnight, changing over to the new financial year.
Here’s what you need to know:
1. Tax savings have arrived!
Stage 3 tax cuts have finally arrived, and we’re excited for you! We’ve banged on about this great opportunity and encouraged you to work out how much you stand to benefit from the tax cuts, then consider what you’re going to with your savings. Now if you haven’t been reading our recent rants about this, CLICK HERE to go direct to the ATO’s page that discusses the tax cuts and provides a calculator that will compare the tax you were paying versus what you will pay in this new financial year..
As we’ve said before, it is opportunities like this that empower you to decide if you’re a financial winner, or you are simply another worker hoping for better financial outcomes but never take action.
2. The concessional contributions cap has increased
When your employer puts money into super for you (being the increased rate of 11.5% of your salary), and any salary sacrifice you make, these funds are classed as concessional contributions (using your before-tax money). From 1 July 2024, the concessional contributions cap increased from $27,500 to $30,000.
This means that for those of you wishing to build more wealth in a tax-effective manner, you have an extra $2,500 you can contribute. This equates to less tax and more wealth – just be sure that you DO NOT need this wealth until after age 60 and you have ceased work.
Remember, this type of contribution to super is taxed at 15% instead of at your marginal tax rate, with your marginal tax rate being anywhere from 0% to 47% (inclusive of the Medicare levy).
And don’t forget that for those of you really wanting to put your retirement wealth building into overdrive, you might have an opportunity whereby you start to utilise your unused concessional contribution cap amounts from previous years (these are known as “catch-up” contributions).
You can consider this strategy if:
1. your total super balance was less than $500,000 at 30 June 2024
2. you have unused concessional contributions cap amounts from up to 5 previous financial years (Check your MyGov account under super “carry-forward concessional contributions)
To put this simply, if you didn’t use $10,000 of your concessional contribution cap over each of the past five years, you should see that you have an extra $50,000 that forms part of your cap along with the new year’s cap of $30,000.
3. The non-concessional (after-tax) contributions cap has increased
Whilst we use pre-tax money concessional contributions, non-concessional contributions to super incur tax (as it has usually already been paid). Non-concessional contributions will not incur tax unless you exceed the cap. From 1 July 2024, the non-concessional contribution cap increased to $120,000 – up from $110,000 last financial year.
Again, there is an opportunity to put your retirement wealth building into overdrive by utilising the “bring forward” rule. This rule allows you to use your $120,000 cap this year whilst also using the cap for the next two years, allowing you to make a total non-concessional contribution of up to $360,000 (previously this was $330,000).
Please take the time to understand the savings you’ll start to see in your next payslip (and bank account) and decide what positive action you will take. We encourage you to understand the super caps and consider perhaps whether the combination of these tax savings and super opportunities can work in tandem to change your financial future.
If you have questions, need further resources or other, please shoot us an email as we’re always happy to help.
Cheers,
Dan and Dave
