As we approach the end of the financial year, it is a good time to review your superannuation contributions and decide if making additional contributions fits with your investment strategy and allowable limits. Making further contributions to superannuation can be a tax-effective strategy that boosts your funds for retirement. However, you don’t have to be approaching retirement to be thinking about your superannuation balance. Making additional contributions early on in your career can have a significant impact due to the effects of compounding returns.
Pre-tax Contributions (Concessional)
Pre-tax contributions are made with pre-tax money (such as employer superannuation guarantee contributions and salary sacrificing). The annual pre-tax contribution limit for the 2019 financial year is $25,000 regardless of your age. However, if you are aged 65 years or over, you will need to satisfy a work test before contributing to super.
Currently, anyone who is eligible to contribute to superannuation is able to claim a tax deduction for their personal superannuation contributions. However, prior to submitting your tax return, you will need to submit a ‘Notice of Intention to Claim a Tax Deduction’ form to your super fund and ensure this is lodged correctly.
After-tax Contributions (Non-concessional)
After-tax contributions are made with after-tax money. The annual after-tax contributions cap is $100,000 and only eligible to you if your superannuation balance is less than $1.6 million on 30 June of the preceding financial year. The table below outlines the contribution cap and bring forward availability based on your age and account balance.
|Under age 65
||$100,000 up to $300,000 (subject to ‘bring forward’ availability)
|Age 65 < 75
|Bring forward availability
|<$1.4 million account balance
||Access to $300,000 cap
(over 3 years)
|$1.4m < $1.5m account balance
||Access to $200,000 cap
(over 2 years)
|$1.5m < $1.6m account balance
||Access to $100,000 cap
(over 1 year)
|≥$1.6 million account balance
Contribution splitting and spouse contributions
Contribution splitting allows you to split pre-tax contributions with your spouse, provided both of your superannuation funds permit this and you meet all necessary requirements (such as age and workforce status). This can only be done after the end of the financial year and it is important that any intention to claim a deduction is submitted to the fund and confirmed before the contribution is split. This can often be done on the same paperwork. The maximum amount that can be transferred is 85% of your pre-tax contributions (100% - 15% contribution tax).
It may also be advantageous to make contributions on behalf of your spouse. For example, you may be eligible to claim a tax offset of up to $540, where an after-tax contribution is made of at least $3,000 and the receiving spouse’s total income does not exceed $37,000.
The First Home Super Saver Scheme or Downsizer superannuation contributions could also be beneficial to your situation.
With the end of the financial year fast approaching, please contact a BDO Private Wealth adviser if you would like to discuss your situation.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.