It looks like I will have to pay Division 293 superannuation contributions tax for the first time. This is an extra 15% tax on superannuation contributions that you have to pay if your income including concessional super contributions is above AUD 250k. My preliminary estimate of my taxable income is already above AUD 250k. So, for sure the total including around 30k of super contributions will be even if the final income number is a little lower. This is probably going to mean an extra AUD 4,500 of tax.
I'm also currently estimating I'll owe more than AUD 13k in extra tax after paying AUD 6k in tax installments. Last year I got a tax refund because of the Virgin Australia debacle. Bond losses can be deducted immediately from your income unlike losses on shares. The tax installments were because the previous year's tax return...
I'm reluctant to stuff more money into super as non-concessional contributions to reduce tax in case we'll need it. For example, to buy a bigger or better located house. If I continue to work, we can't withdraw the money from my account till I'm 65 in 8 years time. And much longer in Moominmama's case. That liquidity costs in taxes.
In the last couple of years we made large non-concessional contributions. I also have illiquid investments in venture capital and art. Our liquid investments are 46% of gross assets not including our house. I doubt I can get a bigger mortgage given my age and Moominmama's low wage income.
2 comments:
Investment bonds? Not counted in personal tax return. Internally taxed at 30% (so less than marginal tax rate, although don't get same CGT concessions), and, if held for 8+ years you pay reduced CGT on any capital gain when sell. Can also add 125% of prev year's amount without the 10-year 'clock' resetting. Not quite as good as super, but has benefit of immediate access if you need to money at any time. The choice of investment options is reasonably broad, eg. dimensional funds, vanguard index funds etc.
ps. I'm actually using my IB investment to accumulate some funds that I might leave to a testamentary trust as part of my estate, with trust making a partial distribution to my heirs, and eventually (in wind-up in 80+ years after my death) going to all my adult living descendants. So it has some interesting possibilities beyond just tax effective investments for own use.
pps. Of course this is general info, not personal advice, yada yada. Do your own research to determine suitability etc. etc.
I have an investment bond we set up in my younger son's name with Generation Life with the money he inherited from my mother. We did this to match the conditions in her will as well as we could and avoid the punitive taxation on minor's investments in Australia if not set up properly through a testamentary trust... But I didn't think to do it in my own name because the tax rate is higher than the long-term CGT rate. I have been trying to get more stuff in my wife's name at a lower tax rate as well as the super contributions and putting the most highgly taxed things into super. Also use borrowing and franking credits... and negative taxed venture capital. And despite all that I have a record tax bill this year :)
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