Key points

• Make additional contributions to superannuation – both concessional and non-concessional – if you are able to.
• Access the government co-contribution for family members and the tax offset for super contributions on behalf of your spouse.
• If in pension mode, make sure you’ve paid yourself the minimum pension.

With the end of the financial year only 21 sleeps away, here are seven essential actions to check off before 30 June with regards to your super. Whether it be making additional contributions, checking whether you have paid yourself enough pension, getting the Government to cough up a co-contribution or claiming that tax deduction for your fund– these actions will help you get the most out of the system.

Next week, we will review what you should consider with your investments as we approach the end of the tax year. Today, we will look at the super system and SMSFs.

1. Can you make additional contributions to super?

If you can, consider making additional super contributions. Concessional contributions include your employer’s 9.5%, any amount you salary sacrifice, or if self- employed, the amount you claim as a tax deduction. Non-concessional contributions are personal contributions – that is, amounts you contribute from you own savings.

Both concessional and non-concessional contributions are capped, as per the following table.

Contribution Caps

The normal age rules apply. Up to age 65, anyone can make a contribution. If you are between 65 and 75 years, then you must pass the work test, which is defined as working 40 hours over any period of 30 consecutive days.

For those working, then the easiest way to make an additional super contribution is probably going to be via salary sacrifice, so talk to your payroll office promptly. If you are making a non-concessional contribution, consider whether it should be in your spouse’s name – evening out the super balances between spouses will make more sense if some of the mooted changes to super ever get made law (see this article).

2. About to turn 65 or want to make a big one off contribution to super?

If you have some investments outside super, or have received a large sum of money and want to make a big one-off contribution to super, then you can potentially access the “bring forward rule”. Under this rule, you can bring forward the next two years’ worth of non-concessional contributions and contribute three times your non-concessional cap in one go – up to $540,000. A couple could effectively get $1,080,000 into super.

To do this, you must be 64 years of age or younger at the start of the financial year – so if you are turning 65 years next financial year, you only have 21 days left to access this rule.

3. Super contributions must be banked by 30 June – don’t leave it to the last minute

While there is some flexibility about the allocation of contributions to member accounts, they must be received and banked by the super fund by 30 June. This year, 30 June falls on a Tuesday – so if making a contribution to your SMSF by cheque, or making it on behalf of a family member to an industry or retail fund by BPay or cheque, allow sufficient time for the funds to be processed and cleared. Most funds say to allow at least two working days – so get your contributions made by 25 June.

4. Can you access, or can a family member access the government co-contribution?

There aren’t too many free handouts from government. The government super co-contribution remains one of the few that is available – so it seems silly not to try to access it. If eligible, the government will contribute up to $500 if a personal super contribution of $1,000 is made.

The government matches a personal contribution on a 50% basis. This means that for each dollar of personal contribution made, the government makes a co-contribution of $0.50, up to an overall maximum contribution of $500.

To be eligible, there are three tests. The person’s taxable income has to be under $34,488 (it starts to phase out from this level, cutting out completely at $49,488), they must be under 71 at the end of the year, and critically, at least 10% of this income must be earned from an employment source.

While you may not qualify for the co-contribution, this can be a great way to boost a spouse’s super, or even an adult child. For example, if your kids are university students and doing some part time work, you could potentially make a personal contribution of $1,000 on their behalf – and the government will chip in $500!

5. Can you claim a tax offset for super contributions on behalf of your spouse?

This tax offset (rebate) has been around for years. If you have a spouse who earns less than $10,800 and you make a spouse super contribution of $3,000, you can claim a personal tax offset of 18% of the contribution, up to a maximum of $540.

The tax offset phases out when your spouse earns $13,800 or more. Effectively, your maximum rebatable contribution of $3,000 is reduced on a dollar for dollar basis for each dollar of income that your spouse earns over $10,800. The offset is then 18% of the lesser of the actual contribution or the reduced maximum rebatable contribution.

Your spouse’s income includes their assessable income, reportable fringe benefits and any (though unlikely) reportable employer super contributions.

6. Pensions – have you paid enough?

If you are taking an account-based pension, such as an allocated pension or transition to retirement pension, then you must take at least the minimum payment. If you don’t, then your fund will potentially be taxed at 15% on its investment earnings, rather than the special rate of 0% that applies to assets that are supporting the payment of a super pension.

The minimum payment is based on your age, and calculated on the balance of your super assets as at 1 July. The age-based factors are shown below.

For example, if you were aged 66 on 1 July and had a balance of $500,000, your minimum payment is 5% of $500,000 or $25,000. You can take your pension at any time or in any amount(s), but your aggregate drawdown must exceed the minimum amount and be taken by 30 June.

If you commenced a pension mid-year, the minimum amount is pro-rated according to the number of days remaining until the end of the financial year, and calculated on your balance when you commenced the pension.

7. Do you know the tax deductions your SMSF could claim?

There are a number of tax deductions that your super fund could claim. Next week, we will deal with those relating to investment property – today, we will focus on the general administrative expenses.

Of course, your SMSF must be in accumulation mode and paying tax to claim a tax deduction. If your fund is in pension, then you aren’t paying any tax and so there is no assessable income to be offset. Where a fund has one member in pension and one member in accumulation, or a member has both an accumulation and a pension account, then you will pro-rata the deduction according to the respective balances of the accumulation amount and the pension amount. Your accountant or actuary will advise you of the percentage that can be claimed.

• Some of the expenses that are deductible include:
  The ATO Supervisory Levy;
• Insurance premiums for death and disability policies;
• Accounting and auditing fees;
• Costs of updating a trust deed to comply with the SIS Act;
• Investment adviser fees;
• Subscriptions to reports such as the Switzer Super Report;
• Administrative expenses such as bank fees, filing fees etc; and
• If you have taken out a limited recourse borrowing arrangement to purchase an asset that produces assessable income, the interest cost.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.