Planning your super contributions for tax time
With the end of financial year fast approaching, now is the time to review your contribution and pension strategy to ensure that all superannuation contributions are made and all pension amounts are withdrawn prior to 30 June 2017.
Here’s what you need to know:
- Concessional contributions are before-tax contributions that include both employer contributions (i.e. superannuation guarantee amounts and salary sacrificed amounts) and personal contributions for which you are eligible to claim a tax deduction for in your personal income tax return.
- Concessional contributions are included in your super fund’s assessable income and are therefore taxed at 15% on entry to the fund.
- The concessional contribution limit is $25,000 for 2017/18.
Personal Concessional Contributions
Effective from 1 July 2017, individuals who receive the majority of their income from employment, are now eligible to make personal tax deductible contributions without having to enter into a salary sacrifice arrangement.
This personal contribution can be made in addition to the 9.5% your employer contributes on your behalf and you can claim a personal tax deduction for it. The $25,000 cap on concessional contributions applies to the combined amount of the 9.5% from your employer and any additional amount you contribute for which you claim a tax deduction. For example, if you earn $120,000 in wages, your employer should pay $11,400 in super guarantee (9.5%), leaving $13,600 which could be contributed to super as a personal concessional contribution. This would result in a net tax benefit of $3,200 (after 15% contributions tax within the super fund).
If you intend to make a personal contribution that you wish to claim a tax deduction for, it is important that you lodge a notice of intention to claim a tax deduction with your superannuation fund.
- Non-concessional contributions are after-tax contributions you make to super from a personal source.
- Non-concessional contributions are not included in your super fund’s assessable income and are therefore not taxed on entry to the fund.
- If you have a total superannuation balance in excess of $1.6m as at 30 June 2017, you are not able to make further non-concessional contributions to super in 2017/18.
- If you have a total superannuation balance below $1.6m as at 30 June 2017, your non-concessional contribution limit is $100,000 for 2017/18.
- If you are aged 64 or under on 1 July, you have the ability to ‘bring forward’ the non-concessional contributions limit for the following two years. The amount of the bring forward that can be triggered in a particular year will be driven by the gap between your total super balance and $1.6m. If the gap is less than $100,000, you cannot trigger a bring forward in that year. Rather, you will be limited to the annual limit of $100,000.
- Extra care needs to be taken where the bring forward provisions have been triggered before 1 July 2017 as transitional contribution caps may apply.
If you are aged 65 to 74 years, you must satisfy a work test in order to be eligible to contribute to super. To satisfy the work test, you must have worked at least 40 hours in a consecutive 30-day period in the financial year before the super fund is eligible to accept your contribution.
If you are aged 75 or over, your super fund is only able to accept mandated employer contributions (i.e. superannuation guarantee amounts) on your behalf.
If you are receiving a pension from your super fund, you must ensure that your minimum annual pension amount for 2017/18 is withdrawn prior to 30 June 2017.
The minimum annual pension payment is calculated as a percentage of your pension account balance as at 1 July 2017, or the date the pension started if commenced part-way through the year, in accordance with the table below:
If you are receiving a Transition to Retirement Income Stream (i.e. you are under 65 years of age and not yet retired), you are only eligible to withdraw a maximum of 10% of your pension account balance as at 1 July 2017, or the date the pension started if commenced part-way through the year.
Please refer to your 2016/17 Financial Accounts and Annual Tax Return covering letter for your minimum and maximum pension requirement for 2017/18.
Do you have any questions or need advice? Not a problem. Our team of highly skilled superannuation specialists are here to help so make contact with them today.