As the end of the 2018/19 financial year end approaches, now is a great time to think about growing your super. Here are some suggestions for streamlining your finances and taking advantage of some tax breaks.
Also known as concessional contributions, these are contributions that go into your super account before you pay tax on the income. Salary sacrifice payments, employer contributions and personal contributions you claim as a tax deduction are all in this category. They are capped at $25,000 in total for this financial year.
All individuals under the age of 75 are able to claim a tax deduction for personal super contributions. This is subject to the above annual concessional contributions cap, their personal taxable income and meeting the work test if they are over age 65. The work test requires that you have worked at least 40 hours in 30 consecutive days prior to making the contribution. From 1 July 2019, recently retired individuals aged between 65 and 74 and who have a superannuation balance below $300,000 as at 30 June 2019 will be able to make voluntary super contributions in the first year that they no longer meet the work test requirements.
You can also top up your super account with non-concessional (after-tax) contributions. These include contributions made by you or your employer on your behalf from after-tax income, and contributions made by your spouse to your super fund or personal contributions not claimed as an income tax deduction. Non-concessional contributions are capped at $100k for the 2018/19 financial year. If you’re under 65 you may also be able to use the ‘bring forward’ rules which allow a maximum non-concessional contribution of $300,000.
If your total superannuation balance is $1.6M or more as at 30 June 2019, you are unable to make non-concessional contributions for the 2019/20 financial year. Also, if you have a balance over $1.4M use of the ‘bring forward’ rules will be restricted.
If the non-concessional contributions cap is exceeded, an excess non-concessional contributions determination will be issued by the Taxation Office and you will have the choice of either releasing the excess non-concessional contributions from the fund or leaving the contributions in the fund. These options have different tax consequences for the individual.
Making a non-concessional contribution may also mean that you’re eligible to receive a Government co-contribution.
Contributions that you pay into your spouse’s super account can be a useful way to grow their fund and provide tax benefits. Spouse superannuation contributions can be made for a non-working or low-income-earning partner with earnings up to $40,000 per year. If your spouse has earnings below $37,000 you can claim the maximum tax offset of $540 when you contribute $3,000 to his/her super. The tax offset is then progressively reduced until it reaches zero for those who earning more than $40,000. Currently the age limit for spousal contributions is 70 and the spouse must meet the work test if over age 65.
You can still contribute more than $3,000 into your spouse’s super account, but you won’t receive the spouse contribution tax offset on anything above $3,000.
Please contact us if you would like any more information.