Owners of small businesses contribute to their employees’ super fund to gain tax rebates. The strategy works pretty fine during the end of a given financial year. However, if not applied diligently, the strategy may not solve its intended purpose.
Keep 30 June in mind when making tax-deductible super contributions
Tax deductible contributions by employers must be made keeping in mind the last date or else the tax benefits may spill out unto the next year. Such contributions can bring down the 30% tax imposable on a business owner to 15% till the time the contribution complies with the upper cap.
EFT should not be left for the last hour
The last date for your fund to receive your super contributions is 30 June. While tax laws allow business houses to deduct contributions from the ledger the moment they are made, they only bring aid to the business owner in the financial year they are received by the employees’ superannuation funds. Employers often make the mistake of assuming that electronic fund transfers (EFT) will take care of their worries. However, very last minute contributions fail even the EFT.
Employers may miss receiving tax rebates this year
Case in point is 30th June. If you use Bpay or some other bank transfer and sit pretty assuming that the fund will be received by the Super fund before July knocks, you may be proven wrong… and at what cost? Money received in July will only fetch you tax reprieve in the next financial year, certainly not your intended purpose.
So the idea is to make tax deductible contributions when the last date is still some breathing space away. This helps avoid cases when contributions are made, let us say, on 29 June and reflects only on 1 July or later. Contributions are considered successfully made only when the given employee’s account increases by aforementioned amount.
Clearing house services can delay receipt of super fund
Clearing house service should also be mentioned in this context. Sometimes, employers choose to make contributions via clearing house services. This can invite trouble if proper diligence is not paid. What if you make the payment to the clearing house service but it fails to transfer the individual contributions to the respective Super funds before 1 July? Needless to say that in this case the contributions do not fetch you a tax aid this year.
Employers must know an employee’s upper contribution cap
Just another point; because the employees have to bear the brunt (penalties) of tax contributions made in excess of the upper cap, it is important for business owners to know what the limit for an individual employee is. For instance, $25,000 is the upper ceiling for those members who will be less than 60 years of age on this 30 June. $35,000 is the limit for those above 60 on the same day.
As a small business owner, when do you make contributions each year?