With the end of financial year nearing, here are some tips in relation to superannuation contributions and some general information about contributions and different ways to contribute to your Superfund in the most tax effective way.
Concessional contribution
Concessional contributions are your tax-deductible contributions which have a limit of $25,000 per year. This limit includes any contributions made by your employer (either superannuation guarantee or salary sacrifice) as well as any personal contribution for which you claim as a tax deduction.
From July 1 2019, if you have below $500,000 in your superannuation, you can rollover the unused concessional contribution from the prior year. You can rollover up to five years from July 1 2019; a total of $125,000 after five years.
Key considerations
- If you intend on using salary sacrifice to utilise your limit, then get in early as your employer may delay the payments. Check with your employer about making the final contribution in June rather than July (as they are only legally obliged to pay up to 28 days after the end of each fiscal quarter).
- If you make a personal contribution, then don’t forget to claim your deduction. If you make a personal contribution and claim a tax deduction, you will need to lodge a Notice of intent to claim or vary a deduction for personal super contributions form.
Concessional contributions are treated as income to your fund so will be subject to 15 per cent tax. If you earn more than $250,0000, you pay Division 293 tax, an additional 15 per cent tax on your contributions for income over $250,000.
Catch-up concessional contribution
From July 1 2019, if you have below $500,000 in your superannuation, you can rollover the unused concessional contribution from the prior year. You can rollover up to five years from July 1 2019; a total of $125,000 after five years.
Key considerations
- You must have less than $500,000 on July 1 of the financial year to rollover unused contributions from the prior year. Check your ATO portal on your myGov account for your unused concessional contributions and July 1 superannuation balance under the concessional contribution option in your superannuation section.
Non-concessional contribution
If you want to increase your superannuation savings, non-concessional contributions provide a much higher limit of $100,000 per financial year. You may also choose to ‘bring-forward’ three years (current and subsequent two financial years) of non-concessional contributions making up to $300,000 in the current year. Non-concessional contributions are not tax deductible.
Key considerations
- Your total superannuation balance on July 1 of the financial year must have been less than $1.6 million.
- If you intend on triggering the ‘bring-forward’, you can only do so if you were under 65 on July 1 of the financial year.
- Be sure to check the current and prior two financial years' contributions to ensure you haven’t inadvertently done in the past. This may result in excess contributions tax or a surcharge charge from the ATO.
Spouse contribution
If your spouse earns less than $40,000 per year, you may be able to make a personal contribution of up to $3,000 to your spouse’s superannuation account and then claim a tax offset of 18 per cent up to $540 on your individual tax return.
Key considerations
- Your spouse’s income will be assessed based on their Adjusted Taxable Income. The spouse contribution counts as a non-concessional contribution to the recipient's limit, and of course, their non-concessional contribution rules apply.
Government co-contribution
If you earn below $53,564, you may be eligible for the government co-contribution of up to $500 if you make a personal contribution of $1,000.
Key considerations
- Check that you meet the 10 per cent eligible income test and all other eligibility requirements.
The final consideration before making any contributions
Check your eligibility to contribute to super. Were you under 65 at the beginning of this financial year or you are between 65 and 75 and meet the work test (working 40 hours in a 30 day period during the financial year)?
Be sure to start planning early to avoid disappointment as far too often a transfer, BPay or cheque payment fails to clear before June 30.
As always, get good advice.
Nadia Gupta of our office has her own Limited Superannuation Licence which is registered with ASIC and will be more than happy to assist with superannuation tax planning and more information.