There are only nine business days left till the end of the financial year. Here is a quick list of the actions to check off to make sure you get the most out of your super.
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%); and
- any amount you contribute via salary sacrifice; and
- if self employed and earn less than 10% of your income from employment, any amount you contribute and claim a tax deduction for.
There are no work restrictions on contributions for people under 65 – 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).
2. Make contributions by 28 June – earlier if paying by cheque or to an external fund
30 June is a Sunday, meaning that the last day a fund can generally accept contributions is Friday 28 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 Tuesday 25 June;
- if paying by BPay or direct transfer, no later than Wednesday 26 June.
3. 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:
[1]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.
4. 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 might wish to assist (the “taxpayer”), you may want to consider this government benefit.
To access the co-contribution, then:
- the taxpayer’s income must be less than $46,920. The full co-contribution is available if the taxpayer’s income is below $31,920 – between $31,920 and $46,920, 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 who earns less than $31,920 “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).
5. 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 (ie 1/7/2012), 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 2012/13 are:
[2]Next financial year (2013/14), the discount that has been in place since the GFC ends. The minimum pension factor (under 65 years) will be 4.0%.
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.
Also in the Switzer Super Report
- Peter Switzer: Time to go hunting [3]
- Rudi Filapek-Vandyck: Weekly broker wrap – ANZ, BOQ and BEN upgraded [4]
- Tony Negline: Don’t get caught by the ATO with excess contributions [5]
- Penny Pryor: Clearance rates recover from slow long weekend [6]