Six essential checks pre June for your SMSF. If you need assistance, call me to discuss on 02 8090 4112
Category Archives: Superannuation
Six Super Tips
Make the most of the tax concessions around super with these tips this June.
Call Lindsay to discuss on 02 8090 4112.
Managing the $1.6m Super Cap
It is often the case where one partner slogs away at home bringing up the family and the other escapes on a regular basis to go to work, that at the end of the day your superannuation balances may be very uneven.
With the introduction of the $1.6m cap it is more important then ever to utilise the strategies available to help even out these balances. Some of these strategies will continue to be available after 1 July 2017 but some will not.
So if uneven balances are a problem for you please call to discuss your options.
Lindsay 02 8090 4112
Quick – get those Non Concessional Contributions in now
Finally, the proposed super reforms have gone through with many changes to take place from July 2017.
One of these well publicised reforms is a change to the Non-Concessional Contribution (NCC) cap, which is to be reduced to $100k p.a. (previously $180k).
However, there are further changes to the NCC affecting those of you lucky enough to have $1.6m in super, or those who hope to attain those lofty heights in the medium to near term, which have had less press.
As an aside, to maintain reading interest & due to popular request, this is our fairly recent new family member (the horse not the child) which seems to be somewhat reducing our capacity for NCC’s, at least in the short term. He is lots of fun though, especially when I get to ride him while short-thing is at school, and then send her a selfie to really rub it in!
Anyway back to the point….
After 1 July 2017, if you have a total of more than $1.6m in super (whether in pension, transition to retirement pension, or super) you will not be allowed to put any NCC’s into super at all. That’s none whatsoever. Nil. Only the $25k concessional contributions will be allowed (eg SGC, salary sacrifice and personal deductible).
You may ask, why would I want to put more in super as earnings on balances over $1.6m will be taxed? This is quite correct, but the earnings will be taxed at a mere 15% on income and 10% on most capital gains, so it is not that bad really. Additionally if your superfund is invested in Australian shares, it will still receive the 30% franking credits which reduce (or possibly eliminate) any tax due.
ACTION POINT
The good news is that the old rules still apply until 30 June 2017, therefore assuming you have not triggered the bring forward caps in the last two years (in which case there are transitional rules), this is a last opportunity for those near or over the $1.6m cap and under age 65 (or over age 65 and passing the work test), to pop an additional $540k into super as a tax free NCC.
If you think this might be relevant please call to discuss your situation in more detail.
Lindsay 02 8090 4112
Super Reforms Passed
The budget super reforms have now passed the senate and only require royal assent to become law, which is thought to be a mere formality.
The major changes are as follows
- Introducing a $1.6 million transfer balance cap which limits the amount that can be transferred to the retirement phase, where earnings are tax-free. This measure will also apply to death benefit income streams.
- Reducing the non-concessional contribution cap to $100,000 pa (or $300,000 under the bring forward provisions), limiting the ability to make NCCs to people who have a total superannuation balance of less than $1.6 million and introducing transitional rules for those who triggered the bring forward rule prior to 1 July 2017.
- Removing tax exempt earnings for transition to retirement income streams.
- Lowering the income threshold for Division 293 tax to $250,000.
- Reducing the concessional contributions cap to $25,000 for all taxpayers.
- Introducing a concessional contributions catch-up regime for those with total super balances of less than $500,000 from 1 July 2018.
- Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test).
- Introducing a low income superannuation tax offset to replace the low income superannuation contribution (which will be abolished from 1 July 2017).
- Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.
- Abolishing the anti-detriment payment.
Next Steps
We will be in touch with our clients that will be affected by the pension cap and changes to existing transition to retirement pensions soon to discuss available options.
I will post a series of blog updates running through the changes in more detail. However if you have any questions please don’t hesitate to call.
One thing to consider now is if you have the means to contribute $540k as a non-concessional contribution, the 2016/17 year is your last opportunity to this before the caps are lowered (note conditions apply).
Lindsay 0413 952 180
More Free Money from the Government
Believe it or not there is still the possibility to get some free money from the government. The superannuation co-contribution is hanging on in there for a little longer so make use of it if you can and grab up to $500 of free cash.
To access the co contribution you need to fulfil the eligibility criteria, the main three being as follows
- The work test… At least 10% of your income must be from employment or running a business. It is not available for stay at home mums unfortunately.
- The income test …. Your total income must be less than $50,454 to access some co-contribution and below $35,454 to get the full co-contribution.
- The age test …. You must be under age 71, and if over age 65 you must also satisfy the work test of 40 work hours in 30 days.
The maximum co-contribution is 50c for every dollar you contribute as an after tax personal contribution to a maximum of $500.
ACTION
It’s easy, transfer up to $1000 of money from your personal bank account to your superfund as a personal contribution before 30 June. The tax office calculates the co-contribution and puts it in your superfund when you lodge your 2016 tax return. There are no forms to fill in.
Tax Offset for those with a Spouse
Do you have a spouse? Would you like to pay $540 less tax?
If the answer to both of these is yes then read on as it is still possible to get a tax offset for superannuation contributions made on behalf of your spouse. It’s free money from the government, so if funds allow, why not do it?
To be eligible for the offset you need to fulfil these requirements
- The income test – the receiving spouse’s income must be less then $13,800
- The age test – the receiving spouse must be under age 65 if not working.
- The residency test – both of you must be Australian resident
The definition of Spouse includes de-facto and same sex couples as long as you are living together. The maximum rebate is achieved by contributing $3,000.
The contribution is not taxed on entering the fund and counts towards the spouses’ $180k non concessional cap.
ACTION
Transfer up to $3,000 from your personal bank account into your spouses’ superfund ensuring you use the correct BPay code for a spouse contribution. Make the transfer prior to 30 June. Keep the receipt of transfer to included in your 2016 tax return to claim the offset.
Lindsay 0413 952 180
