These are the common end of year super strategies that need to be considered in the lead up to 30 June.
Concessional (tax deductible) contributions
The maximum concessional superannuation contribution limits for the 2014/15 year are:
– Individuals aged 50 and over on 30 June 2015 – $35,000 contribution limit
– Individuals aged 49 and under on 30 June 2015 – $30,000 contribution limit
Note that employer super guarantee contributions are included in the cap. Where a concessional contribution is made which exceeds these amounts, the excess is taxed to the fund member’s account at an effective rate of 46.5%.
In order to obtain a deduction in the 2015 financial year, the contribution must be received by the superannuation fund before 30 June 2015.
Personal superannuation contributions
If you are self-employed, or say an investor, and receive less than 10% of your assessable income, reportable fringe benefits and other related payments from employment, you may qualify for a personal tax deduction to superannuation based on the above contribution limits. You should notify the fund of the amount you wish to claim as a deduction before lodgement of your 2015 tax return.
Non-concessional (after tax) contributions
You can make after tax contributions to super from either personal savings, transferring personal investments, an inheritance, or from the sale of investments. The maximum after tax contribution this year is $180,000.
Note that non-concessional contributions of up to $540,000 may be made over a rolling three year period for persons aged 64 and under on 1 July 2014. However, where any contributions (either concessional or non-concessional) are made upon reaching age 65, the “work test” must be satisfied.
The work test requires you to be gainfully employed (i.e. receive remuneration) for at least 40 hours in a consecutive 30 day period during the financial year in which the person plans to make a super contribution. The work test can be satisfied where “employment” involves any income producing activity including babysitting, cleaning, lawn-mowing, gardening, consulting and paid employment.
Note that excess non-concessional contributions are also subject to additional tax of 46.5%.
From 1 July 2014, the after tax contributions cap increased to $180,000 which means if you trigger the bring forward rule, a total of $540,000 can be contributed over the fixed three year period. It is important to note that should the bring forward rule be “triggered” prior to 1 July 2015 (i.e. by contributing more than $180,000 during the current financial year), the member will be unable to take advantage of the increased contribution cap until the three year bring forward period ends.
For example, assume that Joshua triggered the $450,000 brought forward rule during the 2012/13 financial year. This means he must ensure his non-concessional contributions for the 2012/13, 2013/14 and 2014/15 years do not exceed $450,000. Even though the non-concessional contribution cap has been increased to $540,000 from 1 July 2014, Joshua is unable to make a “top up” contribution to bring him up to the new ceiling. He must wait until 1 July 2015 before taking advantage of the increased limit.
Paying minimum superannuation pensions
Where you are in pension phase, ensure that the minimum pension has been paid to you by 30 June. By not receiving the required minimum pension any income earned on your pension investments in your superannuation fund may be taxed at 15% rather than being tax free if the pension rules are met by the fund.
If you are turning age 60 during the 2015/16 year, then consider deferring payment of the next year’s pension until then as the payments are completely tax free.
Drawing superannuation lump sums
Like with pensions, once you reach age 60 all lump sums from superannuation are tax free. However, before age 60 any lump sums that include a proportion of the “taxable component” are subject to tax only where the taxable component is more than $180,000 (indexed annually). Note that a lump sum payment can only be taken where a condition of release has been satisfied (e.g. you have attained preservation age and permanently retired from the workforce).
