The 2017 Financial Year is fast coming to a close – and with the impending changes to superannuation from 1 July, being on top of your end of financial year planning is as important as it has ever been.
Note: Many Super Funds use ‘clearing house facilities’ which means it can take up to 5 business days to process the contributions received. We recommend that you make your final 2017 contributions by no later than Tuesday 27th June to ensure your Super Fund records the contributions for this financial year.
- Maximise super contributions
This is the last year you can access the higher concessional (tax deductible) contribution caps – $30,000 if you are under age 49 or $35,000 if you are aged 49 and over. From 1 July 2017, everybody’s concessional contribution cap reduces to $25,000 per annum.
Non-concessional (after-tax) contributions are also reducing from $180,000 this financial year to $100,000 from 1 July 2017 onwards.
If you are looking for that extra tax deduction or just want to give your super an extra boost – make sure your contributions are received before the cut off dates for your Super otherwise you will miss out on this opportunity.
Remember to carefully check what contributions have already been made for the 2016/2017 financial year as exceeding your annual contribution caps may lead to unintended tax consequences.
- Personal tax deductions
If you are self-employed you may be entitled to a tax deduction for concessional contributions if less than 10% of your taxable income, salary-sacrificed super and “reportable fringe benefits” arise from work as an employee. Thankfully this 10% test is being abolished from 1 July 2017.
If you have been contracting to the same employer all year, you will want to get some tax advice to make sure you will satisfy this test before making the contributions. The above annual contributions caps apply to self-employed people as well.
- Rebalancing accounts between spouses
The end of financial year is also the perfect opportunity to re-balance your pension account with your spouse before the new superannuation rules take effect on 1 July 2017. As long as you have available contribution space and are eligible to withdraw, re-balancing will ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised per member.
- Insurance inside super
As mentioned, exceeding your contribution caps can lead to unintended tax consequences. One common way people exceed their contribution caps is by them, or their employer, paying for the life and disability insurance premiums not realising the policies may be held inside a super fund account. Each premium payment will be treated as a contribution and counts toward your annual contribution caps. If in doubt get it checked out!
- Government Co-contributions
Why not have the Government tip in some money into your super as well. To be eligible for the $500 Government co-contribution for the 2016/2017 financial year, you need to earn less than $51,021 and make a personal (after-tax) contribution of at least $1,000 to your super fund. While you may not be eligible, a spouse or family member working part time (even in the family business) could be.
- Low income super contribution
This concession is designed to pay up to $500 back to the super fund to offset the tax paid on concession contributions made during the 2016/2017 financial year. To be eligible you need to have income of less $37,000 with concessional contributions of at least $3,300. The LISC is reduces depending the amount of concessional contributions made.
From 1 July 2017, the Government is introducing the Low Income Superannuation Tax Offset – essentially the same as LISC but capped at $500.
- Spouse contributions
A little known tax offset is the spouse contribution tax offset. It works when you make a personal (after-tax) contribution on behalf of your spouse to their super fund. For you to receive the maximum tax offset of $540, your spouse has to earn less than $13,800 and the contribution needs to be at least $3,000. There are other conditions as well.
- Contribution splitting
Another way to build your spouse’s super balance is where you ask your super fund to split up to 85% of your concessional contributions and transfer them into your spouse’s super account. The strategy behind contribution splitting may be for estate planning purposes or to hedge against future legislation that reduces tax concessions on higher super balances. There are some age and timing rules which you will need to some assistance with, hence why we tend to see this occur more in self-managed super funds (SMSFs).
- Minimum pension payments
For those receiving super pensions, especially from your SMSF, make sure you have received at least the minimum annual pension before 30th June. Failing to do so puts your SMSF at risk of losing its tax-free status on the assets supporting your pension. If you are not sure what your minimum annual pension is speak to your super fund administrator or accountant now.
- Plan ahead for next year
Finally, now is the time to plan ahead. There are still lots of opportunities for people to build and protect their retirement savings so get in front of your accountant or financial planner today.
How can we help?
If you would like to know more about Superannuation or Retirement Planning, please feel free to give Jason McLaren a call on 0418 800 363. Jason is able to provide you with personalised financial advice through his Australian Financial Services License with Three Chairs Financial Services.
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The information contained in this article is general in nature and does not take into account your personal situation or objectives. You should not act on this information in any way before seeking professional advice.
