Are you a high wages owning employee or a self-employed business owner who paid too much tax last year? There is an effective way to reduce the tax liability by directing the income into your super. The before tax income paid into your super fund under the concessional cap ($30,000 for ages under 49 and $35,000 for ages over 49 in 2016-2017) will be only taxed at 15% which is much less than most people’s margin rate (37% for taxable income higher than $80,000). The amount of the income paid into your super is deductible to your total taxable income.

Example: 

Tina aged 45 had a taxable income $100,000 for 2015. She directed before tax income $20,000 into her super fund. Therefore, she will be paying $3,000 tax at her super fund (15% on $20,000) and receive $17,000 in the fund. In turn, her taxable income will be reduced to $80,000 after deduction of the super contribution. Without this arrangement, she will be liable for $7,400 tax (37% margin rate on $20,000) plus tax on $80,000.

Now the result looks fantastic but how can we direct the income into our super fund? If you are a wages employee, on top of the Superannuation Guarantee your employer paid to your super fund (9.5% in 2016-2017), you can arrange salary sacrifice with your employer up to the concessional cap. Please note the Super Guarantee paid by your employer is also counted towards the concessional cap.If you are self-employed business owner, you can direct your taxable income at your discretion as long as it’s under the concessional cap.

In Pitt Martin, we do not only provide tax return service to our clients but we also give them advice and tailor tax plan for them after the tax return to make sure they are legally paying as less tax as possible. Call us today on 02 9221 3345 or email to connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

The process could be time consuming and expensive for individual trustee. If one of the individual trustee discontinued performs as trustee for the trust such as died or retired, the legal title has to be changed every time when this happens. State government authorities may charge a fee for title changes as a result of changes in membership. On top of this cost, most financial services charge fees for amending the titles of the assets within the SMSF.

However, the changes of director of a corporate trustee is cheaper and less hassles since the change doesn’t affect the legal ownership of the corporate trustee itself. What the corporate trustee can do is appointing another director or leave it as sole director and inform the ASIC and ATO about the changes.

Clarity of Assets

As a member of the fund, individual trustee is exposed to the risk of intermingling their assets with the fund assets; whilst due to the characteristics of independent legal entity of company, the legal ownership of the fund assets is under company which is total separated to each director’s (members) personal assets.

Liability

All trustees are liable to members for any losses incurred as a result of a breach of trust. Individual trustees are personally liable whereas corporate trustees are liable to the extent of the assets of the company (usually $2) unless the directors can be made personally liable (which they generally will be).

Cost

Individual trustee is cheap to establish and running until the change happens to trustees. Corporate trustee requests a company to set up first therefore establishing and running fees will be more expenses. Currently, company registration with ASIC is $469 and $47 annual fee for acting solely as super fund trustee.

In Pitt Martin, we specialized to help clients set up SMSF and manage the super fund tax affairs. Call us today on 02 9221 3345 or email to connect@pittmartingroup.com.au.