The end of financial year is upon us, and with it brings frenzied activity as Australians attempt to get their tax and superannuation affairs in order. This article highlights some of the key considerations and actions to ensure your superannuation savings are maximised and strategies are effective.
Changes in contribution limits
With 30 June falling on a Saturday this year, it would be prudent to make contributions around Wednesday 27 June at the latest, to ensure they are received by your superannuation fund prior to the end of the financial year.
The first step would be to review if you have any income available to contribute to super in FY18, and whether your total contributions paid are below the caps.
The table below outlines the contribution caps for the 2017-18 financial year.
|Type of contribution
||Age at 1 July
Be cautious if making large contributions to ensure that you don’t trigger excess contribution penalties. In this context, remember that contributions are included in a financial year if they are received by the superannuation fund during that year.
Removal of the 10% rule for making personal concessional contributions
From 1 July 2017, most individuals under the age of 75 are able to claim a tax deduction for personal superannuation contributions, regardless of whether their employment status.
The amount of personal deductible contributions that an individual can make is effective limited to the concessional contributions cap, which includes any superannuation guarantee (SG) payments made by their employer during the financial year. The current rate of SG is 9.5%.
For example, Sarah is 55, and during the 2017-18 financial year, her employer makes a total SG payment of $20,000 to her chosen super fund. Given the concessional contribution cap is $25,000 in FY18, Sarah may contribute up to $5,000 and claim a deduction in her personal tax return. The $5,000 is then subject to a 15% contribution tax inside the superannuation fund.
Note that the amount of deduction is limited to your taxable income and cannot give rise to a tax loss.
New eligibility criteria for the non-concessional contributions cap
From 1 July 2017, to be eligible to make further non-concessional contributions, individuals must not have had a total superannuation balance as at the prior 30 June which is greater than or equal to the $1.6 million transfer balance cap. In this case, their non-concessional cap is nil for the current financial year and any additional contributions will be considered excess non-concessional contributions.
For example, if Mary’s total superannuation balance was $1.6 million as at 30 June 2017, she is precluded from making further non-concessional contributions during the 2017-18 financial year.
In addition, individuals may be entitled to a two or three-year bring-forward period for their own non-concessional cap, based on their total superannuation balance, i.e. up to $300,000.
The table below highlights eligibility criteria for non-concessional contribution caps for the 2017-18 financial year.
|Age of member
||Total superannuation balance at 30 June 2017
||Maximum non-concessional contributions cap
||Less than $1.4m
||$300,000 (over 3 years)
|$1.4m to under $1.5m
||$200,000 (over 2 years)
|$1.5m to under $1.6m
||$100,000 (over 1 years)
|$1.6m or greater
|65 and above
(work test must be met)
|Less than $1.6m
||$100,000 (over 1 years)
|$1.6m or greater
Those aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction. If you wish to obtain a deduction for personal contributions, you must complete and lodge a notice of intent with your fund before 30 June 2018 and have this notice acknowledged (in writing) by the fund. Any contribution also needs to be received by your fund before 30 June 2018.
Please contact your superannuation fund administrator to check your eligibility to make non-concessional contributions on or before 30 June 2018.
If you’re in pension phase, you need to ensure the minimum pension has been paid to you for this financial year. Where these requirements haven’t been met, your fund will be subject to 15% tax on your pension investments, rather than being tax-free. Your minimum pension for the 2017-18 financial year is calculated by multiplying your pension account balance as at 1 July 2017 by the percentage factor applicable to you, based on your age at the beginning of the financial year. For a breakdown of the percentage factors for each age range, please see below.
|95 or more
Considering the above, it may also be an opportunity to rebalance pension accounts between spouses, to ensure that they are as even as possible, and that the $1.6 million transfer balance cap is maximised for each.
Superannuation is complex, but implementing the right actions and strategies before June 30 is vital to ensure your superannuation savings are maximised. If you require any assistance, the BDO Superannuation team is here to help so feel free to contact your local adviser by clicking here.
Disclaimer: Please be advised that the information contained in this letter is purely factual in nature and does not take into account your personal objectives, financial situation or needs. The information is objectively ascertainable and, therefore, does not constitute financial product advice. If you require personal advice that takes into account of your particular objective, financial situation or needs, you should consult us in our licensed capacity.