- Maximise your super contributions
The concessional (tax deductible) contribution cap for 2020/2021 financial year is $25,000 for everybody.
Remember, you can also claim any unused portions of your 2018/2019 and 2019/2020 concessional caps. This ‘carried forward’ concessional contribution rule works on a 5 year rolling basis for members with super balances below $500,000.
Non-concessional (after-tax) contributions are $100,000 for 2020/2021 financial year, but the ‘three (3) year bring forward’ rules still apply for those under 65 – with conditions.
| Your Total Super Balance @ 30 June 2020 | Bring Forward Available? |
| Less than $1.4 million | Access to $300,000 over 3 years |
| $1.4 million but less than $1.5 million | Access to $200,000 over 2 years |
| $1.5 million but less than $1.6 million | No bring forward – $100,000 NCC annual cap |
| $1.6 million or more | Nil cap |
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 30th June cut off dates for your super fund otherwise you will miss out on this opportunity.
From 1 July 2021, the concessional contribution cap increases to $27,500 and the non-concessional contribution cap increases to $110,000. Also, the super guarantee increases to 10% – check whether your employment agreement is all inclusive as you may end up receiving less take home pay!
Remember to carefully check what contributions have already been made for the 2018/2019 and 2019/2020 financial years as exceeding your contribution caps may lead to unintended tax consequences.
- Increase your personal tax deductions
One of the better changes to super law is now most employees can claim a personal tax deduction for super contributions they personally make. You will still want to get some tax advice on this beforehand as you may not be eligible for the tax deduction.
Remember – any personal contributions claimed as a tax deduction will count towards your $25,000 concessional contribution cap (or higher if you have unused concessional contribution cap as discussed above).
To claim a tax deduction you will need to notify your super fund and receive confirmation back from the super fund that they have accepted your form. We expect the ATO will continue to monitor this quite closely.
- Build your spouse’s super balance by splitting contributions
Did you know that you can 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.
Remember, the concessional contributions are counted towards your contribution cap even after the transfer to your spouse. 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).
- Rebalance spouses super accounts
There are a range of strategies where rebalancing accounts between spouses or de-facto partners (including same sex) makes sense. It can be an effective way of reducing Centrelink means tested assets, or allowing more super to be accessed earlier by the older spouse, or increasing women’s super balances where there is a gender gap. Rebalancing may involve recontribution strategies, transferring concessional contributions, or by using spare non-concessional contribution caps.
This may be of interest especially if you have total super balance of $1.6 million or greater or anticipate doing so in the coming years. There are some conditions you need to be aware of before implementing these strategies.
- Get a Government Co-contribution
Why not have the Government tip in some money into your super as well. While you may not be eligible, a spouse or family member working part time (even in the family business) could be.
To be eligible for the full $500 Government co-contribution for the 2020/2021 financial year, you need to:
- be under age 71 on last day of financial year; and
- earn less than $39,837 for 2020/2021 and
- make a personal (after-tax) contribution of at least $1,000 to your super fund.
The co-contribution tapers off to nil once you earn more than $54,837. As always there are some other conditions so speak to your accountant before making the contribution.
- Check if you or a family member are eligible for a LISTO
The Low Income Super Tax Offset (LISTO) is designed to pay up to $500 back to the super fund to offset the tax paid on concession contributions made during the 2020/2021 financial year.
To be eligible you need to have income of less $37,000 with 10% or more of your total income coming from employment and/or your business. This may a great way to top up your super if you total super for 2020/2021 financial year is going to be less than $3,333. Same applies if have you employed other family members during the year.
- Get a tax offset by making a contribution on behalf of your spouse
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 $37,000 and the contribution needs to be at least $3,000. The offset is tapered and cuts off once your spouse earns more than $40,000. Your spouse also needs to have a total super balance of less than $1.6 million as at 30 June 2020.
- Check who paid for your Super Fund life insurance premiums
Many people hold life, total and permanent disability and income protection insurance within their super fund. One common way people exceed their contribution caps is not realising that where they, or their employer, pay for the super fund premiums directly, these amounts are treated as contributions and are counted towards the annual contribution caps.
As mentioned above, exceeding your contribution caps can lead to unintended tax consequences. If in doubt get it checked out!
- Make sure you have drawn down the 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.
Note: due to COVID-19 the minimum annual payments from account based pensions has been reduced by 50% for the 2020/2021 year, and this was recently extended by the Government for 2021/2022 financial year.
- Plan ahead for next year
Lastly, now is the time to plan ahead. There are still lots of opportunities for you to build up and protect your retirement savings so get in front of your accountant or financial planner today to start the conversation.
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 07 3338 8966. Jason is a licenced financial planner and can provide you with personalised financial advice through our other business Flow Financial Planning.
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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.
