WEEKLY E-MAIL

2 June 2020

SUPERANNUATION STRATEGIES FOR END OF FINANCIAL YEAR

By Nicola Beswick

In the lead up to 30 June 2020, we will be writing a series of articles that outline several action items that may require your consideration before 1 July 2020.

We encourage you to read and share these articles and contact us if you want to discuss their relevance to you.

This article focuses on maximising your concessional contributions into superannuation.

Need a tax deduction and want to build your super? Make sure you maximise your concessional contributions before 30 June 2020.

What are concessional contributions?

Concessional contributions are those that are made into superannuation on a pre-tax basis. This includes your mandated employer contributions, any salary sacrifice contributions and any personal contributions deposited into superannuation, for which a tax deduction is claimed.

The game-changer – Personal Concessional Contributions

A positive change implemented is the ability for individuals to make a super contribution and claim a tax deduction, up to a limit, in their tax return, regardless of their employment status if under 65.

Therefore, savings (or some investments for individuals with an SMSF), can be deposited into super and earmarked as a personal concessional contribution.

The concessional contribution limit

The concessional contribution cap is $25,000 per annum for the 2019/20 Financial Year. This includes the 9.5% superannuation guarantee contribution.

Unlike previous years, there are no longer differing concessional contribution amounts for people in different age groups. The $25,000 applies, regardless of your age. If you are between the ages of 65 and 74, you must meet the work test, which is 40 hours of paid work over a concessive 30 day period.

Carrying forward concessional contributions

Another useful rule change from is for individuals with less than $500,000 in super at the end of a Financial Year, to utilise the unused portions of their concessional caps from previous years (up to five years’ worth).

This unused carried forward cap amounts start from 1 July 2018 (the 2018/19 Financial Year), meaning the 2019/20 is the first Financial Year individuals can take advantage of unused cap amounts from the previous Financial Year.

Advantage of concessional contributing to super

The primary advantage of making concessional contributions is the difference in the amount of tax paid. Every dollar that is concessionally contributed into superannuation is taxed at 15%, rather than at your marginal tax rate.

The taxation advantages, at each marginal tax rate, are summarised in the table below:

*Individuals with income above $250,000 per annum for Division 293 tax incur an additional 15% tax on concessional contributions.

Other things to be considered:

If you are thinking of increasing your concessional contributions before 30 June 2020, several factors need to be considered. These include:

• How much has already been concessionally contributed into super? If you are close to your contribution limit, then there may not be room for you to make additional contributions.
• What your taxable income is. All concessional contributions are taxed at 15%, upon receipt by the superannuation fund. If your income is below $18,200, your marginal tax rate is zero. Therefore paying the 15% tax on concessional contributions into super is unnecessary. Similar to if your income is between $18,200 and $37,000, where your marginal tax rate is 19% (excluding the Medicare Levy). If your income is above $37,000, then there is a significant tax advantage to making additional concessional contributions into super.
• Accessibility. Remember there are restrictions around when superannuation funds can be accessed.
• Ensuring appropriate notification is given to the superannuation trustee. Appropriate notice must be provided to the trustee(s) of your super fund, where a personal concessional contribution is made, and within the required time limits.

Action required

If you believe that you have scope to increase your concessional contributions, the required actions need to be taken ASAP.

If you need assistance in understanding how much has already contributed, and how much more you need to contribute to reach the $25,000 cap, please contact us.

Nicola Beswick

Senior Financial Planner
Certified Financial Planner®
SMSF Specialist Advisor™
Accredited Aged Care Professional™
Authorised Representative No. 459008

If you have any questions or comments, please email me at nicola@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution. The information here is of a generic nature, and does not take into account your investment objectives or financial needs. No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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