Taxpayers, it’s time to review superannuation contributions

Top tips to review your superannuation contributions - image

With the end of the financial year fast approaching, it is time for you as a taxpayer to review your superannuation contribution strategy.

This 5 point checklist provides a basic list of items for you to review. You may have additional considerations depending on your personal circumstances. But it is a useful tool to discuss with your accountant or financial adviser.

1. Maximise concessional contributions

For most, concessional contributions are the most tax effective method of building your superannuation. For the 2018-19 financial year, the concessional contributions cap is $25,000 for all age groups. Concessional contributions include:

  • Your employer’s super contribution (the compulsory 9.5%)
  • Any amount your employer contributes for you via salary sacrifice
  • Any personal superannuation contribution that you are eligible for and do claim as a personal income tax

You need to ensure all of these are taken into account so that you do not exceed the cap. Where you have a salary sacrifice arrangement in place and are using all of your concessional contributions cap, you should confirm with your employer when the electronic payment of your contribution will be made to ascertain whether or not it will hit your superannuation fund bank account by the 30 June.

2. Personal tax-deductible superannuation contributions

Individuals receiving employment income can generally make voluntary concessional contributions by making personal tax-deductible contributions to super fund directly. In addition, largely self-employed individuals receiving some employment income can make personal tax-deductible contributions regardless of the amount of salary or wages they earn.

This means if you are under 75 years old, you can now claim a tax deduction for personal contributions to your super fund (if you are 65 to 74 years old you need to meet the work test before making the contribution).

It is important to note that to claim a tax deduction for personal contributions, you must give a valid ‘notice of intent to claim or vary a deduction for personal super contributions’ form to your super fund within strict timeframes. Your fund must send you a written acknowledgment, telling you they have received a valid notice from you. You must receive the acknowledgment from your fund before you claim the deduction on your tax return.

3. Non-concessional contributions (NCC)

The general limit on non-concessional contributions (post-tax contributions) is now $100,000 a year and you can “bring forward” two future years’ worth of contributions to a single year allowing a maximum $300,000 in one year if you are eligible to.

4. The spouse contribution offset

Can you claim the Spouse Contribution offset? A tax offset may be available where you make a spouse contribution for your spouse and they earn less than $40,000 during the financial year. The maximum offset is available where you make at least a $3,000 spouse contribution and your spouse’s income does not exceed $37,000 and is reduced in the range of $37,000 to $40,000.

The maximum spouse tax offset is $540 and is calculated as 18% of the lesser of:

  • The dollar amount of spouse contributions you make during the financial year
  • $3000, reduced by the amount of the receiving spouse’s total income exceeds $37,000.

5. Government co-contribution

Individuals less than 71 years old, pass the 2 income tests (income threshold and 10% eligible income tests) and made some non-concessional contributions (post-tax contribution) may receive the government co-contribution up to $500.

There are two co-contribution income thresholds:

  • A lower threshold ($37,697 for 2018–19)
  • A higher threshold ($52,697 for 2018–19)

The amount of government co-contribution you receive depends on your income and how much you contribute.

If your total income is equal to or less than the lower threshold and you make personal contributions of $1,000 to your super account, you will receive the maximum co-contribution of $500.

If your total income is between the two thresholds, your maximum entitlement will reduce progressively as your income rises. You will not receive any co-contribution if your income is equal to or greater than the higher threshold.

If your co-contribution is less than $20, we will pay the minimum amount of $20.

When you lodge your tax return, ATO will work out if you’re eligible and pay it to your super account automatically if the super fund has your tax file number (TFN).

If you have questions about superannuation contributions, please contact the accountants at our Sydney office.