By Liz Maroney, Westlawn Wealth Adviser
19 May 2016
With the end of financial year just around the corner, now’s the time to get your super in order ahead of 30 June. Some of the super strategies to consider now include:
- Optimising your super contributions
- Claiming a tax deduction for personal contributions
- Reviewing your salary sacrifice arrangements
- Checking eligibility for the spouse contribution tax offset
- Splitting contributions with your spouse
- Checking eligibility for the government co-contribution
- Triggering 3 year non-concessional cap if you’re turning 65.
Optimise your super contributions
Review your contribution types and amounts to ensure you’ve optimised your super contributions.
The contribution caps for 2015/16 are:
- Non-concessional contributions cap of $180,000 or $540,000 over 3 years for those aged under 65 at 1 July 2015. However, a $500,000 lifetime non-concessional contributions cap is proposed to be introduced with effect from 1 July 2007. See 2016 Budget Implications below for further details.
- Concessional contributions cap of $30,000. For those aged 49 or over at 30 June 2015, the limit is $35,000.
- CGT cap of $1,395,000 (lifetime limit).
Check the contributions made into all of your super funds to ensure the contribution caps have not been exceeded.
If any doubt, contact your adviser.
2016 Budget implications
The Government has proposed to introduce a $500,000 lifetime limit on the amount of non-concessional contributions an individual can make. All non-concessional contributions made from 1 July 2007 are proposed to count towards this cap. Excess amounts above the lifetime limit will need to be refunded or subject to penalty tax. Non-concessional contributions made prior to 7.30pm on 3 May 2016 cannot result in an excess.
This proposal may limit your ability to make non-concessional contributions. Careful checking of all contributions made since 1 July 2007 is now required. This includes contributions into super funds you may have held in the past.
Where non-concessional contributions of less than $500,000 have been made since this date, care should be taken to ensure this limit is not breached. If you have already contributed more than this amount, any further contributions made after 7.30pm on 3 May 2016 will result in an excess.
This is not yet law.
Claiming a deduction for personal super contributions
If you intend claiming a deduction for personal super contributions, you must lodge a deduction notice, in the approved form, with the fund before the earlier of:
- The day you lodge your tax return for the year in which the contribution was made, or
- The end of the financial year after the financial year in which the contribution was made.
What to consider
Where you roll over or withdraw part of your super benefit before a deduction notice has been lodged, the amount of the personal contribution that can be claimed as a deduction may be reduced. This is because part of the contribution is considered to be included in the rollover/withdrawal amount.
Where you use part of your super benefit to commence a pension, a deduction notice cannot be lodged after the pension commences for contributions made prior to the pension commencing.
A common trap involves contributions made for self-employed persons being incorrectly classified as employer contributions. Any contributions incorrectly classified as an employer contribution will need to be reclassified to a personal contribution before a deduction notice can be accepted. It is therefore important to ensure that contributions are classified correctly.
Review your salary sacrifice arrangements
Review your current and planned salary sacrifice contributions to ensure they are or will be within the concessional contributions cap. Be mindful of employer SG contributions relating to the 2014/15 year that may have been received by your super fund in July 2015.
These contributions will also count towards the concessional contributions cap in 2015/16.
Also review your salary sacrifice arrangements for the 2016/17 financial year to ensure an effective salary sacrifice arrangement is in place. For assistance, contact your adviser.
Spouse contribution tax offset eligibility
If your spouse’s assessable income, reportable fringe benefits and reportable employer contributions is less than $13,800, consider making a non-concessional contribution to their super fund.
A tax offset of 18% of the contribution, up to a maximum of $540, is available where your spouse’s income is below $10,800.
Spouse contribution splitting
You can split up to 85% of concessional contributions made this financial year with your spouse, provided they are not over age 65 or reached their preservation age and retired.
The application to split contributions must generally be made before the end of the financial year after the financial year in which the contribution was made.
Please note that the concessional contributions will still count towards the cap of the spouse who made the contributions.
2016 Budget implications
The government proposed to introduce a lifetime cap on the amount that can be transferred from accumulation to pension phase from 1 July 2017. This will limit the amount of accumulated superannuation an individual can transfer into a tax free pension to $1.6 million. It is proposed that amounts in excess of the $1.6 million cap will be able to be maintained in accumulation phase. This is not yet law.
If likely to breach this cap, contact your adviser.
Government co-contribution eligibility
If your assessable income, reportable fringe benefits and reportable employer super contribution minus deductions from carrying on a business is less than $50,454, consider making a non-concessional contribution of up to $1,000 to super to be eligible for a government co-contribution.
The maximum co-contribution available is 50% of the contribution, up to a maximum $500 for income below $35,454.
If you’re turning 65
If you turned 65 after 1 July 2015, this financial year is your last chance to trigger the 3 year non-concessional cap which allows non-concessional contributions of up to $540,000 over 3 years (assuming you haven’t already triggered the 3 year cap in the previous 2 financial years).
To illustrate, assuming no other personal contributions have been made this year:
- If you contribute $180,001 before 30 June, you can contribute up to $359,999 next financial year or the following financial year
- If you contribute $180,000 before 30 June and have not previously triggered the 3 year cap, you can contribute up to $180,000 next financial year and a further $180,000 the following financial year.
Reminder: If aged 65 and over you must meet the work test to contribute to super. That is, if contributing after turning 65, you must be gainfully employed for at least 40 hours in 30 consecutive days in the financial year the contribution is made.
Super funds generally require a work test declaration to be provided each financial year a contribution is made after you reach age 65.
For advice on end of year super strategies, please contact Liz Maroney:
- Call 02 6642 0433.
- Email firstname.lastname@example.org
Copyright © 2016
General Advice Warning
The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial, tax and/or legal advice prior to acting on this information.
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The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
Liz Maroney and Westlawn Wealth Management Pty Ltd ABN 32 124 861 409, Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749, Australian Financial Services Licensee, 105 -153 Miller Street North Sydney NSW 2060.