Preparing for EOFY 2018
Monthly Focus June 2018
For most Australians, superannuation remains one of the best wealth accumulation structures from a tax perspective. As we approach the end of the 2018 financial year, we would like to highlight some superannuation related issues worth considering.
Things to consider:
- Your total superannuation balance as at 1 July 2017. This is the total of all your superannuation accounts and may influence whether you can make non-concessional (after tax) contributions to super, your eligibility to access the ‘three year bring forward’ opportunity, your eligibility to receive Government co-contributions and a tax offset for any spouse contributions you may make.
- If planning to make additional superannuation contributions, remember that 30 June falls on a Saturday this year. Consider making them well in advance of the end of the year to ensure they are received by your super fund on time. Contributions made by electronic funds transfer, e.g. BPAY, are not deemed to have been made until the money appears in your super funds bank account. This could be some days after you initiate the transfer. Please check with your adviser as cut off dates vary with different providers.
- Concessional contributions include contributions made by an employer such as the 9.5% superannuation guarantee, salary sacrifice contributions and personal tax-deductible contributions. The maximum concessional contributions that may be made this financial year is $25,000. This is less than last year.
- The rules around making personal tax-deductible contributions have been relaxed significantly. Most people, not just the self-employed, are now able to claim a tax deduction for their personal contributions. But limits apply, and steps need to be taken to ensure a tax deduction is valid.
- Non-concessional contributions are contributions made from after-tax income and from other savings. The maximum amount that can be contributed this year is $100,000, or up to $300,000 using the three year bring forward rule. However, if your total superannuation balance at 30 June 2017 was more than $1.6m, you cannot make any non-concessional contributions. If it was between $1.4m and $1.6m, the maximum that can be contributed under the three-year rule has been scaled back.
If you contributed more than $180,000 in either 2015-16 or 2016-17, the amount you may be able to contribute this year has been reduced.
- Planning to buy your first home? Voluntary contributions made to super since 1 July 2017 may be withdrawn for the purpose of buying your first home under the First Home Super Saver Scheme.
- If your total income is less than $51,813, you derive at least 10% of your income from employment or self-employment, and you make a personal non-concessional contribution to super, you may be eligible to receive a Government co-contribution of up to $500.
- People who make a contribution to super for their spouse may be eligible to receive a spouse contribution tax offset of up to $540. The income limits have been increased significantly for 2018 meaning that many more Australians will benefit from this opportunity.
- With the introduction of limits people may now have in a superannuation pension account, the ability to split contributions between spouses, and therefore move towards equalising super, is more important than ever. There is still time to split up to 85% of concessional contributions made in the 2016-17 financial year. Concessional contributions made in 2017-18 may be transferred to a spouses account after 30 June 2018.
- On 1 July 2017 we saw the introduction of the ‘transfer balance cap’. In simple terms, this restricts the maximum amount that may be transferred to a super pension or income stream (these terms are interchangeable). The transfer balance cap is currently $1.6m.
- There are occasions when concessional or non-concessional contributions to super exceed the permissible limits. If this happens, the Australian Taxation Office will issue an excess contribution determination. If you receive a determination it is essential you contact us immediately, even if you think an error has been made. There are strict timeframes that must be adhered to in order to minimise penalties.
- Are you running a small business and have sold the business or any of the businesses assets? If so, you may be eligible to take advantage of the small business capital gains tax concessions. Not only do these concessions save you tax but may enable you to make additional contributions to superannuation without being constrained by the concessional and non-concessional contribution caps.
- As at June 2017, the Australian Taxation Office was holding more than $16 billion of lost and unclaimed superannuation on behalf of Australians. We can assist you is searching for any lost superannuation you may be entitled to.
- One of the attractions of superannuation is the ability to draw a very tax effective income once you retire. However, to receive favourable tax treatment, a minimum amount of income must be drawn each year. Check to ensure you have drawn the prescribed minimum level of income before the end of the financial year.
- Superannuation pensions are not solely reserved for those who have retired, but people who are approaching retirement age may also draw a pension from their super under ‘transition to retirement’ rules.
However, rules relating to transition to retirement pensions underwent major changes from 1 July 2017.
It is imperative that once a person receiving a transition to retirement pension meets a superannuation ‘condition of release’, such as retiring, even if before the age of 65, they inform their super fund or adviser immediately. Doing so may reinstate some of the taxation advantages that were lost from 1 July 2017.
- The money a person has in superannuation does not automatically form part of their estate when they pass away. There are a number of options available for a person to nominate a beneficiary to receive their super in the event of death, however, the rules are complex. We encourage all clients to make appropriate death benefit nominations. If a nomination was made in the past, it is important to review it from time-to-time to ensure it remain current and up-to-date.
The topics covered in this article are a snapshot of some of the things to consider as we head towards the end of the 2018 financial year.
If you have any questions about the issues raised, or if you would like us to review your circumstances or simply check that everything is on track, we are here to assist. Please don’t hesitate to contact us to arrange an appointment if you would like to explore opportunities in your own year-end superannuation planning.
Disclaimer: This article contains general information only. The information contained in this article is not designed to be a substitute for professional advice as such a brief guide cannot consider and cover all individual needs, objectives, circumstances and conditions applying to the law as it relates to these items mentioned in this article. No responsibility can be accepted for errors, omissions or possible misleading statements or for any decisions or actions taken as a result of any material in this communication. Appropriate expert advice should always be considered from a professional financial adviser prior to making any financial decisions.
Past Monthly Focus Topics
Here’s the season to be saving! – December 2017
Is your Estate Planning in place? – November 2017
What comes first: the property or the loan? – October 2017
Total and Permanent Disability Insurance (TPD) – September 2017
Income Protection – August 2017
Super and Concessional Contributions – July 2017
Federal Budget – May 2017
First Home Owners – April 2017
Pension Limits – March 2017
Non-Concessional Super Contributions – February 2017
PrepareForLife_Issue29 December 2017
PrepareForLife_Issue28 December 2017
PrepareForLife_Issue27 September 2017
PrepareForLife_Issue26 June 2017
PrepareForLife_Issue25 March 2017
PrepareForLife_Issue24 Dec 2016