As we approach the end of the 2018 financial year, we would like to highlight some superannuation related issues worth considering.
We are here to assist you and if you have questions, or you would like to explore opportunities in your own year-end superannuation planning, please don’t hesitate to contact us.
Things to consider:
Total superannuation balance
Your total superannuation balance as at 1 July 2017. This is the total of all your superannuation accounts and may influence whether you can make non-concessional (after tax) contributions to super, your eligibility to access the ‘three year bring forward’ opportunity, your eligibility to receive Government co-contributions and a tax offset for any spouse contributions you may make.
Additional superannuation contributions
If planning to make additional superannuation contributions, remember that 30 June falls on a Saturday this year. Consider making them well in advance of the end of the year to ensure they are received by your super fund on time. Contributions made by electronic funds transfer, e.g. BPAY, are not deemed to have been made until the money appears in your super funds bank account. This could be some days after you initiate the transfer.
Concessional contributions include contributions made by an employer such as the 9.5% superannuation guarantee, salary sacrifice contributions and personal tax-deductible contributions. The maximum concessional contributions that may be made this financial year is $25,000. This is less than last year.
Personal tax-deductible contributions
The rules around making personal tax-deductible contributions have been relaxed significantly. Most people, not just the self-employed, are now able to claim a tax deduction for their personal contributions. But limits apply, and steps need to be taken to ensure a tax deduction is valid.
Non-concessional contributions are contributions made from after-tax income and from other savings. The maximum amount that can be contributed this year is $100,000, or up to $300,000 using the three year bring forward rule. However, if your total superannuation balance at 30 June 2017 was more than $1.6m, you cannot make any non-concessional contributions. If it was between $1.4m and $1.6m, the maximum that can be contributed under the three-year rule has been scaled back.
If you contributed more than $180,000 in either 2015-16 or 2016-17, the amount you may be able to contribute this year has been reduced.
First home super saver scheme
Planning to buy your first home? Voluntary contributions made to super since 1 July 2017 may be withdrawn for the purpose of buying your first home under the First Home Super Saver Scheme.
If your total income is less than $51,813, you derive at least 10% of your income from employment or self-employment, and you make a personal non-concessional contribution to super, you may be eligible to receive a Government co-contribution of up to $500.
Spouse contribution tax offset
People who make a contribution to super for their spouse may be eligible to receive a spouse contribution tax offset of up to $540. The income limits have been increased significantly for 2018 meaning that many more Australians will benefit from this opportunity.
Split contributions between spouses
With the introduction of limits people may now have in a superannuation pension account, the ability to split contributions between spouses, and therefore move towards equalising super, is more important than ever.
There is still time to split up to 85% of concessional contributions made in the 2016-17 financial year. Concessional contributions made in 2017-18 may be transferred to a spouses account after 30 June 2018.
Transfer balance cap
On 1 July 2017 we saw the introduction of the ‘transfer balance cap’. In simple terms, this restricts the maximum amount that may be transferred to a super pension or income stream (these terms are interchangeable). The transfer balance cap is currently $1.6m.
Excess contribution determination
There are occasions when concessional or non-concessional contributions to super exceed the permissible limits. If this happens, the Australian Taxation Office will issue an excess contribution determination. If you receive a determination it is essential you contact us immediately, even if you think an error has been made. There are strict timeframes that must be adhered to in order to minimise penalties.
Small business capital gains tax concessions
Are you running a small business and have sold the business or any of the businesses assets? If so, you may be eligible to take advantage of the small business capital gains tax concessions. Not only do these concessions save you tax but may enable you to make additional contributions to superannuation without being constrained by the concessional and non-concessional contribution caps.
Lost & Unclaimed Superannuation
As at June 2017, the Australian Taxation Office was holding more than $16 billion of lost and unclaimed superannuation on behalf of Australians. We can assist you is searching for any lost superannuation you may be entitled to.
Minimum amount of income
One of the attractions of superannuation is the ability to draw a very tax effective income once you retire. However, to receive favourable tax treatment, a minimum amount of incomemust be drawn each year. Check to ensure you have drawn the prescribed minimum level of income before the end of the financial year.
Transition to retirement
Superannuation pensions are not solely reserved for those who have retired, but people who are approaching retirement age may also draw a pension from their super under ‘transition to retirement’ rules.
However, rules relating to transition to retirement pensions underwent major changes from 1 July 2017. It is imperative that once a person receiving a transition to retirement pension meets a superannuation ‘condition of release’, such as retiring, even if before the age of 65, they inform their super fund or adviser immediately. Doing so may reinstate some of the taxation advantages that were lost from 1 July 2017.
Death benefit nominations
The money a person has in superannuation does not automatically form part of their estate when they pass away. There are a number of options available for a person to nominate a beneficiary to receive their super in the event of death, however, the rules are complex. We encourage all clients to make appropriate death benefit nominations. If a nomination was made in the past, it is important to review it from time-to-time to ensure it remain current and up-to-date.
The topics covered in this email are a snapshot of some of the things to consider as we head towards the end of the 2018 financial year.
If you have any questions about the issues raised, or if you would like us to review your circumstances or simply check that everything is on track, please don’t hesitate to contact us on (03) 6344 3899 or send us a message below:
The information on this article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.
Whilst every care has been taken in the preparation of this article, BND Financial Pty Ltd (‘BND Financial Services’), its directors, authors, consultants, editors and any persons involved in the construction of this article, expressly disclaim all and any form of liability to any person in respect of this article and any consequences arising from its use by any person in reliance upon the whole or any part of this article.