If you are an Australian resident for tax purposes, you need to pay taxes based on resident tax rates and may be entitled to superannuation guarantee payments from your employer.
What is income tax?
Income tax is a tax imposed by governments on individuals or entities based on their earnings, profits, or other sources of income. The income tax rate for individuals in the 2024FY is listed below.
For example, if your taxable income is $100,000 for the financial year, your tax payable is $22,967. The calculation follows below.
What is corporate tax?
Corporate tax is imposed on the profits earned by companies, corporate unit trusts, and public trading trusts. The full company tax rate of 30% applies to all companies that are not eligible for the 25% small or medium business tax rate.
A business is considered small or medium if:
its aggregated turnover for the financial year is less than $10 million; and
The majority (80% or less) of its assessable income is not derived from passive sources such as dividends, interest, and capital gains.
What is superannuation?
Superannuation is a mandatory system where employers are required to contribute a percentage of an employee's earnings into a superannuation fund. This fund is designed to provide financial support to individuals during their retirement years. Employees can also make additional voluntary contributions to their superannuation funds.
If you are a contractor, sole trader or self-employed, you don't have to pay super guarantee for yourself. You can choose to make personal super contributions to save for your retirement.
What is the Super Guarantee (SG)?
The Super Guarantee (SG) is a mandatory contribution that employers in Australia are required to make on behalf of their eligible employees into a complying superannuation fund.
As an employer, it is compulsory to pay your eligible employees SG quarterly. The minimum SG rate you must pay for each eligible employee is 11% of their ordinary time earnings in the 2024FY. This is scheduled to progressively increase to 12% by 1 July 2025.
What are salary sacrifice contributions?
Salary sacrifice contributions refer to voluntary contributions made by an employee to their superannuation fund from their pre-tax salary.
The benefit of salary sacrificing is that you can reduce your taxable income, meaning you pay less tax on your income. These concessional contributions are taxed in the super fund at a rate of 15%, which is generally less than your marginal tax rate.
What are personal super contributions?
Personal super contributions are the amounts you contribute directly to your super fund.
If you choose to apply a tax deduction to these contributions, they become concessional and are essentially derived from your pre-tax income. In this case, they undergo taxation within the fund at a rate of 15%.
However, if you opt not to claim a tax deduction, these contributions are categorized as non-concessional and originate from your after-tax income or savings. Importantly, non-concessional contributions do not incur additional taxation.
Note that there is no limit to the amount you can salary sacrifice or make personal contributions into super; however, you should be careful about the following tax implications.
Concessional Contributions Cap
$27,500 is the maximum amount of before-tax contributions you can contribute to your super each year without contributions being subject to extra tax.
Division 293 tax
Division 293 tax is an additional tax on super contributions, reducing the tax concession for individuals whose combined income and concessional contributions for Division 293 purposes is more than $250,000.
Division 293 tax is charged at 15% of the lower of:
Excess concessional contributions over the $250k threshold
Total concessional super contributions
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