Super co-contributions again

We are hammering this because its a great strategy, almost too good to be true.

A taxpayer can make "eligible spouse contributions" on behalf of his/her spouse. In some situations the taxpayer is able to claim a tax offset of 18% on the first $3,000 contributed providing a maximum offset of $540. This assumes the receiving spouse has assessable income plus reportable fringe benefits less than $10,800 to receive the maximum offset. Once the receiving spouse’s income reaches $13,800 there is no entitlement to this tax offse

The Government will make a co-contribution to match personal after-tax contributions (undeducted) made to superannuation by certain taxpayers. The maximum co-contribution of $1,500 is reduced by 8 cents for every dollar over the lower income threshold of $28,000, with the co-contribution phasing out completely at the upper income threshold of $58,000.

One of the criteria to be eligible for the co-contribution for this year is the person must make an undeducted contribution by 30 June 2007. The co-contribution is claimed when the person’s lodges their tax return for the 2007/08 year.

This is a great strategy to implement for your children once they are working part time and before they become economically independent.

Utilising Tax Losses
A taxpayer may incur a capital loss in the year (or have carried forward losses).

A capital loss can only be used to offset a capital gain. Unused capital loss can be carried forward to be offset against capital gains realised in future financial years. As the dollar value of the loss is constant the value is diminished over time. This means consideration could be given to realising capital gains which are offset by the losses. If an asset has been held for more than 12 months the taxpayer could use the 50% discount, however the discount is applied after the gross capital gain is reduced by any capital losses.

Borrowing to Invest
A gearing strategy may be appropriate for individuals who are prepared to accept a higher level of risk and have a long term investment horizon. There are a number of gearing options available such as:

borrowing against the equity in a person’s home
margin loans
instalment warrants.
Understanding the features of each option is important and in many cases interest can be prepaid 12 months in advance. This brings forward the deduction into this financial year.