Super Contributions to Reduce Tax Bracket?

Low Punt on 18/06/2025 - 15:37
Last edited 19/06/2025 - 10:05

Hi

I am considering a super contribution to reduce tax and ideally drop into a different tax bracket.
I can contribute $30k to Super and $27k carried forward for ATO. Both non-concessional but applying to convert to concessional. I can’t find a logical explanation as to how this is calculated as far as taxable income is concerned.

Theoretical numbers because I’m still waiting on exact figures.
If my tax bracket starts at $45,001 and I earned $80k - would contributing $35k to Super reduce my taxable income to $45k and the lower tax bracket or is it more complex?

I received a payout and it was paid this year instead of next. It was not expected and it will mess up various family supports, hex, etc so it might make more sense to drop a large amount into super. Rather than giving it back as tax.

Edit: I only found the payment would be processed recently- I have actually called a number of tax agents however they were either too busy, didn’t know, didn’t get back to me etc - thus thought I query on here in the interim. I wasn’t after free advice and was happy to book a session.

Financial Superannuation

Comments

  • MS Paint on 18/06/2025 - 15:46
    +5

    hex

    That's a new one for the ozbargain dictionary.

    Pay an accountant $150 for 20 minutes of their time to get correct advise advice.

    • Low Punt on 18/06/2025 - 16:02

      Sorry HECS.

      I’ve been calling accounts for a few days without luck. Unfortunately this landed on my this week as it was expected NFY

      • Lastchancetosee on 19/06/2025 - 09:30
        +1

        Your super fund can give you advice on options and amounts for voluntary contributions.

  • jv on 18/06/2025 - 15:48
    +2

    various family supports, hex

    Do you mean non binary ???

  • jv on 18/06/2025 - 15:49
    -1

    it might make more sense to drop a large amount into super

    Not if you die before you can access your super…

  • pao2x on 18/06/2025 - 15:51
    +8

    You have approximately a week to make up your mind because a lot of super funds do not process this a week before the EOFY 30 June

    1- Check your carry forward in ATO how much is available
    2- Check how much has already been paid to super from your employer this financial year and subtract that to the $30000 available concessional contributions this year.

    It is not complex at all. Just subtract whatever you personally contribute to your taxable income. It is then taxed at 15% when it enters your super as long as concessional contributions are available.Otherwise it is again taxed at your highest marginal tax bracket.- Double taxed unless you claim it back.

    https://www.ato.gov.au/tax-rates-and-codes/tax-rates-austral…

    As always this is not financial advice

    • soan papdi on 18/06/2025 - 16:16
      +5

      It is then taxed at 15% when it enters your super as long as concessional contributions are available.

      This is incorrect afaik .Contributions to Super are considered non-concessional by default. Which means they go in as is and is not taxed. You have to submit a notice-of-intent to convert it to a concessional contribution at which point your Super will subtract 15% and pay the ATO. The ATO will then reduce your taxable income.

      Otherwise it is again taxed at your highest marginal tax bracket

      This is incorrect too afaik. Non-concessional contributions are not taxed again.

      EDIT: I think I understand. Your concessional should not exceed 30K for the FY, so when you submit the notice-of-intent, be careful about the amounts

      EDIT 2: https://www.ato.gov.au/individuals-and-families/super-for-in…

      You can boost your super by adding your own personal contributions, which are the amounts you contribute directly to your super fund.
      If you claim a tax deduction for them, they're concessional contributions and are effectively from your pre-tax income. They are taxed in the fund at a rate of 15%.
      If you don't claim a tax deduction for them, they're non-concessional contributions and are from your after-tax income or savings. They are not further taxed.

      • pao2x on 18/06/2025 - 19:50

        you are correct.

        • Lastchancetosee on 19/06/2025 - 09:32

          There is also an option for higher voluntary contributions taking into account orevoius years. I didn’t know about this until discussing it with the financial advisor at the fund.

          • pao2x on 21/06/2025 - 08:58

            @Lastchancetosee: That is probably carry forward. Nothing stopping you from more voluntary contributions, except maybe the $3 million super tax and if it makes financial sense tax wise

  • sghetti on 18/06/2025 - 16:06
    +8

    Just putting this out there, child support, HECS etc. add any contributions like that back on, it doesn’t excuse you from those obligations. Negative gearing, super contributions are added back in Adjusted Taxable Income and you’re assessed based on that.

    Adding super contributions to max our concessional contribution or unused rollover is good. We’re taxed progressively and worrying about which bracket you’re in probably should be the main focus. But it can mean you can make your $’s work better for you though.

    • Low Punt on 18/06/2025 - 16:17

      No child support but due to low income as I was unable to work we did receive a bunch of family assistant payments.
      I assumed was curious if my taxable income was less due to super we wouldn’t need to repay these.

      I’ve called about 4 tax agents with no luck on these questions.

      • sghetti on 18/06/2025 - 16:34
        +1

        Family tax benefits and assistance payments will generally use adjusted taxable income which would add these sorts of contributions back.

        https://www.servicesaustralia.gov.au/what-adjusted-taxable-i…

      • TilacVIP on 19/06/2025 - 08:55
        +1

        Yeah, don't expect to call a random accountant and expect to help you out for free. One in a thousand might do that, but most expect to be paid for their time.

      • larndis on 19/06/2025 - 09:26

        If you're talking about Family Tax Benefit and/or Child Care Subsidy, you will get a debt if your adjusted taxable income ends up being significantly higher than the estimate you provided. As others have said, it's 'adjusted' to add things like rental losses and super contributions back in, so not much you can do to reduce your ATI at this stage.

  • Trying2SaveABuck on 18/06/2025 - 16:42
    +3

    Dude speak to an accountant based on this post you shouldnt be doing any of this on your own

  • geekcohen on 18/06/2025 - 16:48
    -1

    Remember the tax bracket starts at $45,001

    So you technically need to be under $45,000 to be in the lower bracket.

    Aaaannnndddd as everyone else said, speak to an accountant. Once you find one, stick with them. Its a lot easier and can give you advice. We have been using the same guy for just under 10 years and its just so much easier. Plus I got audited once and it was simple with him.

    • DingoBilly on 19/06/2025 - 08:34
      +3

      Not sure what your point is on the $45k.

      Whether it's $45k or $45,001 the difference would be 30 cents so doesn't make a difference.

      • BigTop on 19/06/2025 - 18:27
        +1

        If you are $1 dollar over $45001, you will automatically pay $4288 plus 30 cents tax for every dollar over, up to $135,000 where things get uglier.

        • leigh8904 on 19/06/2025 - 19:53
          +1

          Which is kind of just what @DingoBilly said.
          Income $45k => tax $4288.
          Income $45,001 => tax $4288.30.

          up to $135,000 where things get uglier.

          Alternatively view would be things are looking better when earning such high income. Your take-home pay is still higher.

  • Drakesy on 18/06/2025 - 17:09

    Basically it's a law of diminishing returns, the less you earn the worse the benefit.

    Having said that it's almost always better to chuck it into super (as long as you're paying more than 15% base tax).
    This won't let you skip out on Private health cover loading etc… as that's based on your gross tax.

    • TilacVIP on 19/06/2025 - 08:54

      Correct, to gain the most benefit, you'd like to be in the 30% + tax brackets, so OP should be fine if they make $80K.

  • Benoffie on 18/06/2025 - 17:09
    -1

    I'll just add that this type of large Super concessional contributions is generally not made unless:

    • all other debts are cleared and you are in the 50+ age bracket heading towards retirement
    • you are in a high income brackets and making such contributions sees a large benefit in both tax, Medicare Levy and PHI etc savings
    • you have spare cash, like Scrooge McDuck

    If you are unsure > goto Accountant

    • SlickMick on 19/06/2025 - 09:00

      I'd say maxing concessional super is generally advisable unless:
      * You'd rather maximise equity in PPOR
      * You have no spare cash

  • HardQuiz on 18/06/2025 - 17:15
    -1

    You didn’t tell us what is this large unexpected payout?

    • kiitos on 19/06/2025 - 10:46
      -1

      Sounds like a worker's comp payout maybe?

  • jetblack on 18/06/2025 - 17:33
    +12

    Super Contributions to Reduce Tax Bracket

    To put it out there: People who say this usually seem to think the tax rate at their "bracket" applies to the entirety of their income, instead of just the income that lands in that bracket.

    eg. If you earn $80k:

    • The first $18,200 is tax free
    • Everything between $18,200-45,000 is taxed at 16%
    • The next $35k is taxed at the 30%

    Trying to "reduce your income to the next bracket" might be largely pointless, depending on your aims. On the upside, you'll contribute a ton to super, which is a good thing

    • xylarr on 19/06/2025 - 18:32

      Thankyou for saying this so I don't have to

  • Smulder on 18/06/2025 - 17:49
    +1

    Note that personal super deductions are generally added back for the calculation of income for things like family support.

  • JohnSy on 18/06/2025 - 18:50
    -1

    If you want to educate yourself regarding super and get a better general understanding of year-end tax strategies, there is a lot of good stuff buried in these podcasts:

    https://thestrategystacker.com.au/podcast/
    https://www.retireright.com.au/

  • Leiothrix on 19/06/2025 - 07:58

    Tax brackets only apply to income over the threshold and don't affect anything underneath it.

    Trying to avoid income to lower your tax bracket is counter productive as it means you get less money.

    Additionally the concessional super contribution cap is currently $30k not $35k, and that includes employer contributions. There are ways around that and also non-concessional contributions, but I'm keeping it simple here.

    I would suggest firstly learning the basics of how the Australian taxation and superannuation systems work, and secondly engaging the services of an accountant.

  • pandadude on 19/06/2025 - 08:52
    -1

    Get professional advice from someone who is registered with the appropriate agency. Better to get the advice and then take or not take action based on that advice.

    Also please ensure you give this person all the relevant information and not selective sections as the advice would be useless.

    Putting money into superannuation and then claiming Personal super contributions may reduce tax but may not reduce your other bills.

  • BigBirdy on 19/06/2025 - 09:11
    +1

    If you’re going to contribute in this fin year to super, you need to do it soon, however you still have plenty of time to decide what amount of that contribution you will claim as concessional. i.e. make a contribution large enough to cover what you might want to claim as concessional, then sometime after end of fin year go see an accountant to do your tax and calculate your most advantageous concessional amount, then lodge a Notice of Intent form for that amount with your super fund. When your super fund confirms receipt, tell your accountant to lodge your tax return. The remaining contribution will be treated as non-concessional, and untaxed.

  • hughes on 19/06/2025 - 10:18
    +1

    whatever you contribute becomes a deduction thereby reducing your taxable income. i contribute about 15k a year and that gives me an extra 5k in tax returns.

    whether you land in a different bracket matters less as others have pointed out.
    i'd recommend not dipping below 45k taxable income via super contributions alone (you may have other deductions to claim). below 45k you're taxed at 16% which means you're only saving 1% in taxes by topping up your super.

    • BigBirdy on 19/06/2025 - 12:34
      -2

      Also save 2% Medicare levy and possibly some LITO rebate

      • Danam on 23/06/2025 - 15:34
        +1

        One little tidbit is that the Medicare Levy Surcharge cannot be avoided by making concessional super contributions. You obligations here are calculated using your net assessable income and not your taxable income. So if you hit one of the surcharge brackets, you can't avoid it like this.

    • BigBirdy on 30/06/2025 - 14:58
      +1

      On a taxable income of $45,000 you'd pay PAYG $4288, Medicare $900 and get back LITO (Low Income Tax Offset) $325, giving a total tax burden of $4863.

      If you made a concessional super contribution of $20,000, you'd have a taxable income of $25,000, pay PAYG $1088, Medicare $0 and get back LITO $700, for a tax burden of $388. Your super fund would deduct 15% tax on the contribution, ie $3000. Totals taxes paid $3388.

      So by paying $20K into super, you'd save 4863-3388=$1475, a tax saving of 30%

  • Danam on 23/06/2025 - 15:40

    If you are saving for a house, you could look into the FHSS. The deemed rate of return has been quite a bit better than the bank (currently 6.78%). You could save a few thousand (mostly by reducing your taxable income) over a few years - and get it out for a house. The process is the same as making concessional contributions (via the notice of intent form).

    It's a confusing scheme and not for everyone, but just FYI.

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