The end of the financial year is fast approaching. Here is a quick list of the actions to check off to make sure that you and your family members are getting the most out of the super system. And as the super rules apply to all, it doesn’t matter whether your family are members of your SMSF or not.
1. Maximise your super contributions – up to the caps
Maximise your concessional and non-concessional contributions, up to the $25,000 and $150,000 respective limits.
Concessional contributions are:
- Your employer’s super contribution (the compulsory 9.25%);
- Any amount you contribute via salary sacrifice; and
- If self employed and earn less than 10% of your income from employment-related activities, any amount you contribute and claim a tax deduction for.
Non-concessional contributions are personal contributions that come from your own monies.
If you are over 60 years of age or turned 60 during financial year 2013/14, then you can make concessional contributions up to a higher limit of $35,000.
There are no restrictions on contributions for people under 65 other than the contribution cap. Between 65 and 74, a fund can only accept a contribution if the member meets the work test (40 hours paid employment over any 30-day consecutive period during the financial year). Once you have turned 75, your fund can only accept employer-mandated contributions (the compulsory 9.25%).
2. Have you just turned 65, or about to?
If you turned 65 during FY2013/14, this is your last chance to access “the bring forward” rule and contribute three times your non-concessional cap in one go – up to $450,000. You must be under 65 on 1 July to access the rule.
3. The non-concessional cap is going up – you may want to delay making a large contribution
The non-concessional cap increases from $150,000 to $180,000 in FY2014/15. If you are considering a large personal contribution to super, you may want to delay making it until 1 July (i.e. next financial year). Under the “bring forward rule”, which allows three years worth of non concessional contributions in one year, the maximum will increase from $450,000 to $540,000.
4. Don’t leave it to the last minute – make contributions by 27 June
While 30 June is a Monday, the weekend before means that the last day that many external funds can realistically accept contributions is Friday 27 June. Although there is some flexibility around the allocation of contributions, there is none around the banking of the monies. It must be in the super fund’s bank account this financial year to qualify.
So, if making a contribution to an external fund (say, for example, for a spouse or adult child):
- If paying by cheque, no later than Wednesday 25 June;
- If paying by BPay or direct transfer, no later than Thursday 26 June.
And, of course, any contribution that your SMSF accepts must be banked by 30 June.
5. Spouse contribution – can you access the $540 tax offset?
If you have a non-working or low-income spouse, who is less than 70 years of age, then you may be eligible for a tax offset of up to $540.
For each $1 of spouse contribution you make up to the maximum of $3,000, a tax offset of 18% is available.
Your spouse’s income (which includes assessable income, reportable fringe benefits and reportable employer super contributions) is tested as follows:
Above a spousal income of $10,800, the maximum spouse contribution is reduced on a dollar for dollar basis, so that it is fully phased out when the spousal income exceeds $13,800.
If your spouse is aged between 65 and 69, he/she must meet the work test. Once the spouse turns 70, a spouse contribution cannot be accepted.
6. Co-contribution from the Government of $500 for low-income earners
There aren’t too many handouts from the Government – and despite being downsized to only $500, the co-contribution remains one of them. If you have a low-income spouse or partner engaged in employment, or even an adult child working part-time who you may wish to assist, then consider this government benefit.
The co-contribution is a contribution by Government to a taxpayer’s super fund (including an SMSF) when the taxpayer makes a personal super contribution.
To access the co-contribution:
- The taxpayer’s income must be less than $48,516. The full co-contribution is available if the taxpayer’s income is below $33,516. Between $33,516 and $48,516, the maximum co-contribution is reduced by 3.333 cents for every $1 in excess;
- At least 10% of the taxpayer’s income must come from employment related activities;
- The taxpayer makes a personal super contribution – the Government matches this on a $1 for every $2 made, up to a maximum personal super contribution of $1,000; and
- The taxpayer must be under 71 year’s of age at the end of the year.
The maximum contribution is $500, which is made when a taxpayer earns less than $33,516 and “makes” a personal super contribution of $1,000.
Income includes assessable income, reportable fringe benefits and reportable employer super contributions (most commonly, salary sacrifice amount).
7. Taking a pension – have you taken enough?
If you are taking an account-based pension (including a transition to retirement pension), make sure you take at least the minimum payment amount. There can be significant taxation costs if you don’t – potentially, the earnings on all the assets supporting that pension will be taxed at the full 15%.
The minimum payment is a percentage of the account balance as at 1 July (i.e. 1/7/2013), and is fixed for the year, regardless of any changes in the account balance. If you commenced a pension during the year, it is a percentage of the account balance at the commencement, and pro-rated based on the number of days remaining in the financial year.
Minimum payments are based on your age at the start of the year (or age when commencing a pension during the year), and for 2013/14 are below.
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.
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