With the financial year-end fast approaching, there is still time to take advantage of the various superannuation contribution strategies and concessions that are available. The following a brief summary
1) Personal tax-deductible contributions
The Concessional contributions cap is $25,000 for all individuals People under age 67 may be eligible to claim a tax deduction for making a personal contribution to their superannuation fund of up to $25,000 in the current financial year. For employees, their employer 9.5% Superannuation Guarantee (SG) contributions, superannuation contributions paid on bonuses plus any salary sacrifice amounts to superannuation, also count towards this cap. Where this applies, the available personal tax-deductible contribution will be limited to the difference between the$25,000 cap and the amount of the employer contributions.
Is it possible to contribute to superannuation after age 67?
If someone is 67 years or over but no older than 75, they may also be eligible to make a concessional or non-concessional contribution if they either:
- meet the work test (working 40 hours over 30 consecutive days in the relevant financial year), or
meet the work test exemption. Individuals between 67 and 74 in the first year of their retirement can make voluntary contributions into their superannuation account without needing to satisfy the work test (the work test exemption). The relaxation of the work test rules only applies once, and one cannot make contributions in subsequent Financial Year without meeting the work test. To qualify, person must have had less than $300,000 in their superannuation account at the end of the previous financial year.
2) Non-concessional (after-tax) contributions
The Non-concessional contributions cap is $100,000 per individual, subject to a $1.6 million total superannuation balance
The standard non-concessional contribution limit is $100,000 p.a. for each individual as long as their total superannuation balance (TSB) on the last day of the previous financial year (thatis, 30 June 2020) was less than $1.6 million.
3) Bring-forward non-concessional contributions cap
Under the bring-forward rule, a person can bring forward an additional two years’ worth of non-concessional contributions, allowing them to make a contribution of up to $300,000. Once they have triggered the bring-forward rule (contributing more than $100,000 in any financial year), they have up to three years to utilize the bring-forward cap.
4) Carry-forward concessional contributions
Individuals can make catch-up concessional contributions into their superannuation fund using their unused concessional contributions cap amounts from previous years. To qualify,individuals must have a TSB of less than $500,000 on 30 June of the previous financial year and must not have used all of their $25,000 annual concessional contributions cap in theprevious financial year. Under the rules, individuals can carry-forward up to five years of unused concessional contributions caps for use in a later financial year, but the rolled-forward amounts expire after five years. The five-year carry- forward period commenced on 1 July 2018, meaning 2020/21 is only the second year in which catch-up contributions can bemade. For individuals aged 67 or over, the normal work test rules apply.
5) Downsizer contributions
People aged 65 years and over can make non-concession- al contributions of up to $300,000 using the proceeds from the sale of their principal residence. This measure provides a mechanism to those who may otherwise be restricted in making additional contributions to superannuation due to their age and circumstances.
To qualify, an individual or their spouse can sell any dwelling in Australia (other than a caravan, houseboat, or mobile home) provided it has been owned for at least 10 years. While the dwelling does not have to have been lived in continuously over the 10 years leading up to the sale, it must meet the test for a ‘main residence’ exemption under the capital gains tax rules.
Downsizer contributions must generally be made within 90 days of settlement of the home sale unless an extension is granted by the ATO.
6)Spouse contributions tax offset
The Maximum tax offset is $540
A person can claim up to $540 as a tax offset if they make a $3,000 after-tax superannuation contribution for their spouse who has total income of less than $37,000. The recipient spouse must be under age 75 and must have a TSB of less than $1.6 million as at 30 June 2020 (immediately before the start of the 2020/21 financial year). The tax offset amount reduces when the spouse’s income is greater than $37,000 and completely phases out when the spouse’s income reaches $40,000.
The Maximum co-contribution entitlement is $500
If someone makes a post-tax contribution of $1,000, the federal government will make a co-contribution of $500 into their superannuation account if total income (earned as an employee) is $39,837 or less. The co-contribution cuts out when an individual’s income exceeds $54,837. A person must be less than 71 years of age and have a total superannuation balance of less than $1.6 million as at 30 June 2020.
Given the large options and complexities it is recommended you consult a Financial Planner to work out which strategy is best for you
For more information please contact the team at MASU at firstname.lastname@example.org or contact Martin Speiser on 0413742906
Any investment information and general advice displayed or given on this website does not take into account any person’s personal objectives, financial situation or needs and, because of that, you should, before acting on the general advice, consider whether it is appropriate for you, having regard to these facts. You should also consider obtaining independent legal, financial and/or other professional advice before making a decision in relation to any investment.