Most of us, particularly women are significantly under- funded for our retirement. This month’s column will assist you to add to your super fund balance and at the same time reduce your overall tax liability.
However you must act NOW as contributions must be in your super fund’s bank account by Friday 28th June as the end of the financial year falls on a Sunday. You also need to allow up to five days to ensure your fund receives your contributions in time to be processed and banked so set Monday 24th as your last day to send off your super contributions.
Personal Concessional (Deductible) Contributions
If you are an employee, you can now make a personal concessional contribution without the need to put in place a salary sacrifice arrangement with your employer. Self- employed persons have always been able to make such deductible contributions.
For the 2018/19 financial year the cap for concessional contributions is limited to $25,000 inclusive of employer super guarantee contributions normally set at 9.5% of gross employment income.
So check your likely shortfall now, calculate the amount you can contribute without breaching the cap and either request from your super fund the Notice of intent to claim a deduction for personal super contributions or download the form NAT 711121-11.2014 from the ATO website.
Concessional contributions are taxed to your super fund at 15% but being tax deductible to you will reduce your tax by your marginal tax rate per dollar contributed.
Please note if you are aged 65 to 75, you must pass the work test of 40 hours work over a continuous 30 day period to be eligible to make a concessional contribution to super.
The Low Income Superannuation Tax Offset (LISTO)
If at least 10% of your adjusted taxable income of up to $37,000 is from business or employment, the Government will provide a contribution to your super fund of up to $500 being an amount equal to 15% of concessional contributions you have made up to $3,333. That amount is inclusive of employer super guarantee contributions so topping up with a personal concessional contribution may be well worth while for low income earners.
Personal Non-Concessional (Non-Deductible) Contributions
In addition to the above capped concessional contributions, if you are under 75 years and have less than $1.6 million in super at 30th June 2017, you may contribute up to $100,000 p.a. as a non-concessional contribution which is not taxed to your super fund.
If you are under 65 and have less than $1.4 million in super you can bring forward up to two years of non-concessional contributions meaning you could contribute $300,000 this financial year as long as you have not triggered the ‘bring forward’ provision in the previous two years.
If you have surplus funds available this is an excellent way to boost your retirement fund without your fund being taxed at 15% on your contribution.
The Government Co-Contribution
If you are less than 71 years old at 30th June 2019, have a total superannuation balance of less than $1.6million at 30th June 2017 and an adjusted taxable income of up to $52,697 this year and made non-concessional contributions you may be eligible for the co-contribution of up to $500.
To receive the maximum co-contribution you must have made personal non-concessional contributions of at least $1,000 and have had total income of at least $37,697. Otherwise the co-contribution will be tapered down in line with your reduced contribution and higher total income.
If your partner’s relevant income is $40,000 or less and they have less than $1.6 million in super and haven’t exceeded their non-concessional contributions cap for the year, you could qualify for a tax offset of up to $540 on the first $3,000 you contribute to superannuation for them from your after-tax income. The maximum tax offset applies when your spouse’s earnings are below $37,000.
Super contributions is a complex area so you should contact your super fund to inform them of your intentions which must be communicated to your fund on the appropriate form and preferably check with your tax agent, remembering that time is now the essence.
The content of this article is not intended to be used as professional advice and should not be used as such.
Brian Spurrell FCPA, CTA, Registered Tax Agent, is Director of Personalised Taxation & Accounting Services Pty Ltd. PO Box 143 Warrandyte 3113. Mobile: 0412 011 946,
Email: firstname.lastname@example.org, Web: www.ptasaccountants.com.au