We recently spoke to a financial advisor and one of the topics was on making extra super contributions to take effect of the lower 15% rate. In particular it was around our carry-on forward contributions to effectively back date some payments (might be wrong wording but you get my meaning).
In the last two years I have moved into a high earning job, and I have already reached my concessional cap for the past two years as well as getting taxed at the highest rate.
However, one thing he advised was that for the previous years (let's use one
year as example with a outstanding of 10k on the cap), is to pay in this 10k,
and then at the end of the year I will get a tax deduction. I am just trying to
figure out the maths on this, and would like someone to confirm I have this
right.
Since this is considered an after-tax contribution, does this mean (all other things being equal), that I would get a tax return of 30% of this 10k? 30% being that the highest tax bracket this year is 45% - the 15% super.
In addition, I also pay the division 293, which is where you no longer get the 15% benefit for super and get taxed at the full 30% once over your cap. If by paying the 10k, and it
happens to reduce my income under this limit for div293, do I also gain the benefit of not have to pay the div293?
One last question:
We will be using our redraw account to top up the super (not using cash). If we use the 10k example, then this is the equivalent of taking out a 10k loan (because we will then get
charged interest on it for the term of the mortgage which is currently 25 years). Do the benefits of moving this cash to super outweigh the negatives of essentially
having to pay a 10k loan back over the same term? I would assume yes only under
one condition – that is that the interest on the mortgage is lower than the growth of the super each year, is this logic correct?
Disclaimer – I know there are other things in play, and you cannot predict the market of what will happen next year etc. I am giving this simplistic example, to confirm I understand only how these mechanisms work – I don’t need to be told that we can the re-invest the tax saving back into the mortgage, I know there is that benefit too. I just want to focus on what I’ve discussed and not complicate it with other things first. Feel free to add the extra complexities if you feel you want to, but please first answer my questions based on what I said only first.
Thanks in advance!
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