As we approach 30 June 2021, reviewing your superannuation funds and understanding the super contribution rules can provide valuable benefits when undertaking tax planning.Read-more
The rules have changed significantly in recent years.
The below table summarises the current personal and spouse contribution rules:
|Age||Super guarantee and award||Employer voluntary/Salary Sacrifice||Member/personal||Spouse|
|Under 65||At any time||At any time||At any time excluding downsizer contributions||At any time|
|65-66||At any time||At any time||At any time including downsizer contributions||At any time|
|67-75||At any time||Work test or work test exemption required||Work test or work test exemption required||Work test or work test exemption required|
|75 and over||At any time||Not permitted||Not permitted||Not permitted|
Here are some of the current contribution types, rules and thresholds:
Concessional contributions include employer superannuation guarantee contributions, salary sacrifice contributions and personal deductible contributions.
The concessional contribution cap for 2021 is $25,000.
Concessional contributions are taxed at 15% on the way into the superannuation fund, and can provide a significant tax saving, particularly for those individuals on higher marginal tax rates. For those who have an adjusted taxable income of $250,000 or higher, an additional 15% contributions tax, called Division 293 tax, may apply to some of your contribution.
Individuals under age 67 can make personal contributions up to the concessional contributions cap and claim the contribution as a tax deduction, without needing to pass a work test.
If you are over age 67, then you need to have passed a work test to make a personal concessional contribution. To pass the work test you need to have undertaken work for at least 40 hours, over a 30 day period during the financial year.
Individuals who have not fully utilised their concessional caps from the 2018-19 financial year, may be able to utilise these unused concessional contribution cap amounts in the current financial year. In order to be eligible to use any previously unused concessional contribution cap space in the 2021 financial year, you need to have a total superannuation balance of under $500,000 at 1 July 2020.
To ensure that a tax deduction can be claimed for the concessional contribution being made a valid notice of their intention to claim a tax deduction must be provided to the trustee of the fund and the fund issues an acknowledgement. A valid notice of intent to claim a tax deduction form must be submitted on or before the date your tax return is submitted, or 30 June in the financial year following the financial year the contribution is made.
There are additional contributions that can be made to superannuation to obtain a tax benefit in the 2021 financial year.
Spouse contributions, can provide a tax offset of up to $540 for those who make a contribution of up to $3,000 into an eligible spouses superannuation account. In order to receive the maximum offset the recipient spouse must have adjusted taxable income of below $37,000, with no tax offset available if the recipient spouse has adjusted taxable income of above $40,000.
It is important to note that spouse contributions count towards the receiving spouses non-concessional contributions cap.
Non Concessional contributions
Non Concessional contributions are contributions that are made into superannuation where a tax deduction is not claimed.
The non concessional contribution cap is $100,000 for the financial year.
The bring forward rule allows clients under age 65 to contribute up to three times the non-concessional contributions cap in a financial year, or over the next two financial years.
The bring forward rule is triggered when a client:
- makes a non-concessional contribution which exceeds the annual non-concessional contributions cap, and
- is under age 65 at the beginning of the financial year, and
- the client is not already in an active bring forward period.
The number of years a client can bring forward is determined by their total super balance at 30 June the financial year before the contribution is made.
|If a client’s total super balance is between…||Their maximum non-concessional contributions cap is…||Which reflects the use of the cap for …|
|$0 to $1.4m||$300,000||The current year plus the follwoing two financial years|
|$1.4m – $1.5m||$200,000||The current year plus the next financial year|
|$1.5m – $1.6m||$100,000||The current financial year only|
For any contribution received by the trustee after the member turns age 67 but before age 75, the member must meet the work test or work test exemption. The work test can be satisfied by completing 40 hours of gainful employment in a consecutive 30 day period in the financial year in which the contribution is made. The work test exemption will be satisfied if the member satisfied the work test in the previous financial year had a total super balance below $300,000 at 30 June of the previous financial year and had not already used the work test exemption.
If you wish to discuss any of these things, please do not hesitate to call your normal Johnsons MME contact.
This information is general in nature and does not take into account your personal goals, objectives or financial situation. Personal advice should be sought prior to making any investment or strategy decisions. Grant Lewis is an employee advisor of Johnsons MME Financial Advisory Pty Ltd ABN 30 141 828 033 and is authorised to provide advice on behalf of Johnsons MME Financial Advisory.
Grant is a Certified Financial Planner (CFP) with the Financial Planning Association (FPA) and an accredited Self Managed Superannuation Fund Specialist with The SMSF Association. He has completed a Bachelor of Business (Accounting) and Post Graduate Diploma in Finance (Financial Planning) with FINSIA.