- If you are looking at ways to increase your retirement savings …
You may wish to consider seeking advice about setting up a self-managed-super fund (SMSF).
A SMSF allows you to have greater control over your assets and investment decisions. You will have the flexibility to choose when and which assets to purchase (and when to sell). This will give you the opportunity to effectively and more closely manage the tax position of your SMSF.
A SMSF can also be used for asset protection and succession planning.
- If you want to get a tax deduction for your personal income tax return …
You may wish to make a concessional contribution to your superfund.
Concessional contributions are currently capped at $25,000 for the 2020-21 year. Any contributions you make on top is subject to additional tax.
You will also need to complete a notice of intent to claim or vary a deduction for super contribution.
If you are between the age of 65 and 74, you will need to satisfy the work test before making any personal contributions. The work test generally requires an individual to be ‘gainfully employed’ for at least 40 hours during a consecutive 30-day period within the financial year the contribution is made.
- If you did not make any concessional contributions last year …
You may wish to access the unused concessional cap carrying forward.
From 1 July 2018, members can carry forward their concessional contribution if you have a total superannuation balance of $500,000 or less. Members can access the unused concessional contribution cap on a rolling basis for 5 years.
The first year you can access this concession is 2019-20.
If you have any unused concessional cap from 2019-20, you may wish to consider making additional concessional contributions for 2020-21.
- If you want to turn your savings into super savings …
You may wish to consider making non-concessional contributions.
Making non-concessional contributions will not attract tax or reduce your personal taxable income for the year. However, future investment earnings will be taxed at a reduced tax rate of 15% which is significantly lower compared to individual or company tax rates.
The current non-concessional contribution cap is $100,000 for 2020-21.
- If you earn less than $54,837 a year …
The Government may co-contribute up to $500 to your superfund account if you:
- are under the age of 71 at the end of the financial year;
- have a super balance of less than $1.6 million;
- earn $54,837 or less in 2020/21; and,
- have at least 10% of your total assessable income from your job or a business.
You may receive the maximum co-contribution if you contribute $1,000 and earn $39,837 or less.
You may receive a lower amount if you contribute $1,000 or less and/or earn between $39,837 – $54,837.
The $54,837 earnings include assessable income, reportable fringe benefits, and reportable employer super contributions.
- If you want a tax offset …
You may wish to consider making an after-tax contribution to your spouse’s superfund.
You may qualify for a tax offset up to $540 if:
- you contribute $3,000 to your spouse’s super; and,
- your spouse earns $37,000 or less in a year.
A lower tax offset will be available if your spouse earns between $37,000 – $40,000 or if you contribute less than $3,000.
The $37,000 earnings limit includes assessable income, reportable fringe benefits, and reportable employer super contributions.
- If you are expecting a bonus …
Talk to your employer and ask if they offer salary sacrifice.
A salary sacrifice allows your employer to directly contribute to your superfund as part of your remuneration package (usually at 9.5%). The sacrificed component of your remuneration package is not included in your assessable income and is not subject to PAYG withholding tax.
Consider whether this will result in your contribution caps or whether you may be able to use the unused concessional cap carry forward.
- If are you thinking about downsizing your family home …
You may wish to consider making a downsizer contribution into your superannuation.
If you are over the age of 65, you can contribute up to $300,000 to your superfund using proceeds from the sale of your main residence.
If you choose to make a downsizer contribution, you must:
- meet the eligibility requirements;
- inform your fund in approved form; and,
- provide information to your fund prior to making the contribution.
The downsizer contribution is not a non-concessional contribution and will not count towards your contribution caps. It will, however, count toward your transfer balance cap and will be relevant for determining eligibility for the age pension.
- If you have borrowed money or are considering borrowing money for your superfund’s investment portfolio …
You may wish to prepay interest on your loan before 30 June and claim a tax deduction for the year.
- If you have extended your stay in Australia due to COVID-19 …
Your Australian employer may be required to make super contributions even if you are working temporarily in Australia.
When you leave Australia, you can apply to have this super amount paid to you as a departing superannuation payment.
To be eligible, you must:
- have accumulated super while working in Australia on a temporary resident visa (excludes Subclasses 405 and 410);
- your visa has ceased to be in effect (for example, it has expired or been cancelled);
- have left Australia and do not hold any other active Australian visa; and,
- not be an Australian or New Zealand citizen, or a permanent resident of Australia.
- If you are thinking of buying your first home …
You may wish to release up to $30,000* under the First Home Super Save Scheme to help you purchase your first home.
This may be particularly relevant for young adults who have previously made voluntary concessional and non-concessional superannuation contributions into super (a low tax environment) for the purposes of saving for their first home.
To quality for this scheme, you must:
- be over the age of 18;
- have not previously owned property or land in Australia (including investment properties); and,
- have not tried using this scheme to access your super.
* will increase to $50,000 from 1 July 2022.
- If you have a SMSF, make sure your binding death benefit nomination is in accordance with the trust deed …
You may wish to review your SMSF trust deed to ensure that your binding death benefit nomination (BDBN) complies with it.
It is important to highlight that superannuation entitlements upon the death of a member are dealt with in accordance with the trust deed. If you have a made a BDBN that is not in accordance with the trust deed, your BDBN will not be valid. Where this is the case, the trustee of the SMSF may be vested with the discretion to deal with this, or it may be hard-wired into the terms of the trust deed.
- If you are contemplating a business sale …
Consider the availability of the small business capital gains tax concessions (SBCCs). If you satisfy the SBCCs conditions, not only may you reduce your overall tax liability on the business sale, but you may also be able to top up your superannuation fund. Where the appropriate election is made, such contributions are excluded from your non-concessional contribution caps.
If you have any questions or require assistance with any of the above, please do not hesitate to contact a member of Coleman Greig’s Taxation Advice team, who would be more than happy to assist you today.
