Year-end superannuation contributions and concessions

By Martin Fowler - June 4, 2020

With the financial year end fast approaching, there is still an opportunity to make a final contribution into superannuation. Some of the contributions strategies and concessions available are summarised below.

1. Personal tax-deductible contributions

Concessional contributions cap is $25,000 for all individuals.

Since 1 July 2017 all taxpayers under age 65 are allowed to claim a tax deduction on personal contributions to super, up to the $25,000 annual concessional contributions cap. If you are an employee, take note that your concessional contributions cap includes any employer contributions made (including 9.5% super guarantee contributions and any salary sacrifice contributions made). This means your personal tax deductible contribution will only be the remaining cap space (if any).

If you are aged 65 to 74, you must satisfy the work test (gainfully employed for at least 40 hours over 30 consecutive days during the financial year) to make a contribution. You are not permitted to make a contribution if you are aged 75 and over.

Be mindful that an additional 15% tax is levied on concessional contributions for individuals where combined income and concessional super contributions exceed $250,000. The tax payable is levied on the excess over this $250,000 threshold, or on the super contributions, whichever is less.

2. Non-concessional (post-tax) contributions

Non-concessional contributions cap is $100,000 per individual, subject to a $1.6M total super balance.

The standard after-tax contribution limit is $100,000 p.a. for each individual, as long as your total super balance (TSB) on the last day of the previous financial year (i.e. 30/06/2019) was less than $1.6 million. If you are 65 years or above at the time of making the contribution, you still need to satisfy the work test.

Standard bring forward non-concessional contributions cap

Before you turn 65, you are also eligible to utilise the bring forward rule where you can contribute up to two additional years’ worth (up to $300,000) in one go (but then prevented from making any further contribution for 3 years).

If your total super balance exceeds $1.4 million on the last day of the prior financial year, the bring forward cap reduces as shown below:

Total super balance at 30/06/2017

Bring forward NCC cap

Bring forward period

Less than $1.4M

$300,000

3 years

$1.4M to less than $1.5M

$200,000

2 years

$1.5M to less than $1.6M

$100,000

1 year (i.e. standard cap applies)

$1.6M or greater

Disqualified from contributing

3. Commencement of carry forward concessional contributions

From 1 July 2019, individuals can make catch-up concessional contributions into their super fund using their unused concessional contributions cap amounts from previous years. To qualify, individuals must have a Total Super Balance of less than $500,000 on 30 June of the previous financial year and must not have used all of their $25,000 annual concessional contributions cap in the previous financial year. Under the rules, individuals can carry-forward up to five years of unused concessional contributions caps for use in a later financial year, but the rolled forward amounts expire after five years. The five-year carry-forward period started on 1 July 2018, meaning FY20 is the first year in which catch-up contributions can be made.  If you are aged 65 or over, the normal work test rules apply.

4. Spouse contributions tax offset

Maximum tax offset is $540.

You can claim up to a tax offset of $540 if you make a $3,000 super contribution for your spouse who has total income of less than $37,000[1].  The offset progressively reduces between $37,000 and $40,000, where it cuts off completely. To be eligible your spouse must either be under their preservation age, or aged between their preservation age and 65, and not retired.

5. Government co-contribution

Maximum co-contribution entitlement is $500.

If you make a post-tax contribution of $1,000, the Government will make a co-contribution of $500 into your super account if your total income (earned as an employee[2]) is $38,564 or less. The co-contribution will start to reduce to a minimum of $20 as your income approaches $53,564. To be eligible, your total super balance must be below $1.6 million as at 30 June 2019 and have not exceeded your non-concessional contribution caps.

6. Low income super tax offset

Maximum low-income super tax offset (LISTO) is $500.

If your total income is $37,000 or less, you may be eligible for a super tax refund on the concessional contributions you or your employer makes.  The Government refunds the 15% tax on these contributions up to a maximum of $500.

The information provided is not personal advice. It does not take into account the investment objectives, financial situations or needs of any particular investor and should not be relied upon as advice. While the information is provided in good faith and believed to be accurate and reliable at the date of preparation, we will not be held liable for any losses arising from reliance thereon. We recommend investors consult their personal financial adviser to discuss suitability and application to their individual circumstances. You should also obtain a copy of and consider the Product Disclosure Statement for any financial product mentioned before making any decisions. Past performance is not a reliable indicator of future performance.

[1] Total income is based on recipient spouse’s assessable income, including reportable fringe benefits and salary sacrifice contributions.

[2] You can also earn self-employment income or business income, but it must be less than 10% of your total income, include reportable fringe benefits and reportable super contributions.


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