Jordan George, Head of Policy, SMSF Association
This article originally appeared in the June 2018 ASX Investor Update email newsletter and is published on the ASX website
Age may just be a number, but it is an important factor in determining how the changes to the superannuation contribution rules apply to you.
65 and 75 are often the key ages in regards to eligibility and given that the Australian Taxation Office (ATO) considers that contributions are made to a fund when they are received – it is important to review how you are tracking in line with your contribution strategy before the end of the financial year.
Before the end of the financial year you should:
- Review if you have any income available to contribute to your fund; and
- Review your total contributions to ensure they are below the caps.
Non-Concessional (after-tax) contributions
The non-concessional caps have reduced to $100,000 for the 2018 financial year.
Your age will determine if you are required to meet the work test.
If you are under 65 you can make personal after-tax contributions to your super fund regardless if you are working.
If you are between 65 and 75 you can only make personal after-tax super contributions if you meet the work test. That is you are gainfully employed for at least 40 hours over 30 consecutive days during the financial year.
If you are 75 you are unable to make voluntary contributions. Your birthday may be important here, as a contribution must be accepted by your fund no later than 28 days after the month that you turn 75.
From 1 July 2017, members under 65 years of age have the option of contributing up to $300,000 over a three-year period for members depending on their total superannuation balance.
| Total Superannuation Balance | Contribution and bring forward available |
|---|---|
|
Less than $1.4 million |
Access to $300,000 cap (over 3 years) |
|
Greater than or equal to $1.4 million and less than $1.5 million |
Access to $200,000 cap (over 2 years) |
|
Greater than or equal to $1.5 million and less than $1.6 million |
Access to $100,000 cap (No bring-forward period, general non-concessional contributions cap applies) |
|
Greater than or equal to $1.6 million |
Nil |
Please see the source here.
Transitional arrangements apply to individuals who brought forward their non-concessional contribution cap in the 2015-16 or 2016-2017 financial years.
Regardless of your age, if your total superannuation balance is more than $1.6 million immediately before 30 June 2017 there is no capacity for you to make any more non-concessional contributions into your fund.
To discover more about monitoring your $1.6 million transfer balance cap, watch our recorded webinar here.
Concessional (before tax) contributions
These are essentially contributions from before-tax income, or for which a tax deduction has been claimed. These amounts typically include compulsory employer contributions and salary sacrifice contributions.
Your employer is required to make compulsory employer contributions regardless of your age. Therefore, where you are working at the age of 75 or beyond you still have the ability to have concessional contributions made on your behalf by an employer.
Before 2017, members aged 49 or over had access to higher caps for contributions from before-tax income, or contributions for which a tax deduction has been claimed.
From 2017, there are no longer higher caps for those over a certain age. There is a flat cap of $25,000, that applies to all ages. (A decrease from the previous $30,000 cap).
If you exceed the cap the ATO will issue you with an excess concessional contribution determination and the excess is included as assessable income in your tax return. Any extra tax you pay will depend on your taxable income.
The Government announced in the Budget that individuals whose income exceeds $263,157 and have multiple employers will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee from 1 July 2018.
The measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory superannuation guarantee contributions.
Click here for further SMSF measures announced in the 2018-19 Federal Budget.
Personal Deductions
From the 2017-2018 and future financial years, most people regardless of their employment arrangement, will be able to claim a deduction for personal super contributions they make to their fund until they turn 75.
Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction.
If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your fund before June 30 and have this notice acknowledged (in writing) by your fund.
If you are planning to split all or part of your personal contributions with your spouse, you need to give your trustee the notice of intent to claim a deduction first. If your trustee has accepted your application to split your contributions, they cannot accept the notice to claim a deduction.
For further information on Personal Superannuation Contributions, read our Insight Paper on the topic here.
Co-contributions
If you meet the relevant work tests and earn less than $51, 813, it is also worth considering if you can take advantage of the Government super co-contribution.
Where you are under 71 at the end of the financial year in which you make the after tax contribution to your SMSF, the government may also make a contribution to the fund up to $500.
From the 2017-2018 financial year you are not eligible for the co-contribution if you exceed your non-concessional contribution caps or your Total Superannuation Balance is $1.6 million or greater.
TBAR reporting
The nearing of the end of the financial year is also a timely reminder that funds that were paying a retirement phase income stream at 30 June 2017, which continued to be paid to them on or after 1 July 2017 will need to complete and lodge a Transfer Balance Account report on or before 1 July 2018.
For all funds annual or quarterly reporting requirements will apply from 1 July 2018.
This article originally appeared in the June 2018 ASX Investor Update email newsletter and is published on the ASX website here.