Here a few last minute SUPER tips – remember the ‘super landscape’ changed last year so 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 2018 contributions by no later than Tuesday 26th June to ensure your Super Fund records the contributions for this financial year.
1. Maximise super contributions
The concessional (tax deductible) contribution caps have reduced to $25,000 for everybody.
Non-concessional (after-tax) contributions have also reduced to $100,000 this financial year, but the three (3) year bring forward rules still apply – with conditions.
|Your Total Super Balance (TSB)
||Contribution and 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 cut off dates for your Super Fund otherwise you will miss out on this opportunity.
Remember to carefully check what contributions have already been made for the 2017/2018 financial year as exceeding your annual contribution caps may lead to unintended tax consequences.
2. Personal tax deductions for everybody?
One of the bigger changes to super is now most employees can claim a personal tax deduction for super contributions they 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.
To claim a tax deduction you will need to notified your Super Fund and receive confirmation back from the Super Fund. We expect the ATO will be monitoring this quite closely.
For the self-employed, the challenge is always can you do something else with this money to build your business? Nevertheless, saving for your future is equally as important as the here and now.
3. Rebalancing accounts between spouses
There are a range of strategies where rebalancing accounts between spouses make sense. Using spare non-concessional contribution cap can be effective way of reducing Centrelink means tested assets or allowing more super to be accessed earlier.
This may be of interest especially if you have TSB of $1.6 million or greater or at least project to do so in the coming years.
4. 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!
5. 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 2017/2018 financial year, you need to earn less than $36,813 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.
6. Low income super contribution
The Low Income Superannuation Tax Offset is designed to pay up to $500 back to the super fund to offset the tax paid on concession contributions made during the 2017/2018 financial year. To be eligible you need to have income of less $37,000 with concessional contributions of at least $3,300. The LITO reduces depending the amount of concessional contributions made.
7. 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 $37,000 and the contribution needs to be at least $3,000. There are other conditions as well.
8. 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).
9. 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.
10. 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.