With the end of the financial year fast approaching, now is the perfect time to make some final checks and ensure everything is in order before 30 June. The following are some useful planning tips particularly for our clients that can take advantage of some of the contribution restrictions that were removed from 1 July 2022.
Re-contribution strategy
While re-contribution strategies have been around for many years, they have been re-enlivened with the relaxation of the contribution rules on 1 July 2022. Based on an ATO media release dating back to 2004 (NAT 04/058), the industry view is that a simple re-contribution strategy is unlikely to attract the anti-avoidance provisions. This is despite the ability to change the tax components of a member’s superannuation interest which may ultimately lead to lower amounts of tax being paid when the member dies, and a death benefit is paid to a non-tax dependant.
Check your superannuation caps
There are annual caps on how much you can put into your super account, so it’s essential to monitor the total amount of both your concessional (before-tax) and non-concessional (after-tax) contributions across all your super accounts, particularly if you’re considering making a pre-30 June contribution.
It’s important to check whether any payments intended for the previous financial year slipped into this financial year to ensure you don’t breach a cap. Don’t forget your concessional contributions include all your employer’s SG contributions, salary-sacrifice amounts and any personal contributions for which you plan to claim a tax deduction.
Get your contributions in before 30 June
If you want to have a super contribution counted in the current financial year, ensure your super fund receives it by 30 June. This is particularly important if you plan to claim a tax deduction for contributions.
The key date for making contributions is not when you make the payment, but when it’s received by your super fund. Even though many banks and financial institutions now offer instant payments, electronic fund transfers and BPAY can take a number of days to appear in your super account, so make sure you send off your payment well ahead of the deadline.
Consider topping up your super from your savings to get a tax deduction
If you have space in your concessional contribution cap, consider making a personal tax-deductible contribution into your super account using some of your savings.
Although your contribution will be taxed 15% as it enters your super account (or up to 30% if your income plus your concessional super contributions is $250,000 or more), this is likely to be lower than your marginal tax rate and you could enjoy a significant tax saving.
This type of contribution is considered a concessional (before-tax) contribution and counts towards your annual concessional contributions cap.
Get your salary sacrifice savings plan ready for next year
Now is the time to start talking to your employer about putting a salary-sacrifice arrangement in place for next financial year. Salary sacrifice is an arrangement where part of your before-tax salary is paid into your super account rather than being paid to you as take-home pay. These arrangements can be a tax-effective way to boost your super account.
To be valid, a salary-sacrifice arrangement needs to be set up before you have earned the income you wish to sacrifice. You can set up a salary-sacrifice arrangement at any time, but many employers and payroll managers prefer to set these up to coincide with their annual budget and your salary review for the start of the new financial year.
Boost your spouse’s super account
If the balances of you and your spouse’s super accounts are unequal and you are the higher earner, consider submitting a request to split some of your super contribution with your spouse to even them up. (Spouse here refers to married and de facto couples). Requests to split need to be made by 30 June of the financial year following the year the contributions were made, so you can split some of your super contributions from last financial year if you lodge a request with your super fund by 30 June.
If your spouse has an adjusted taxable income below $40,000, you can also consider making a contribution into their super account to boost their retirement savings and earn yourself a tax rebate.
Eligible contributions into your spouse’s super account of up to $3,000 will provide you with a tax offset of up to $540.
If you want some last minute advice before the end of June then please give me a call and we can chat over the phone to make sure you are taking advantage of all the tax rules.
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