With the End of Financial Year (EOFY) approaching, it may be a good time to review the contributions made to your Superannuation Fund and potential opportunities to top up with further contributions. There are two main types of super contributions available to grow your Superannuation.
1. Concessional Contributions
An employer will make Superannuation Guarantee Contributions (SGC) to their employees Superannuation Fund. They may also make contributions that the employee has arranged to salary sacrifice. These contributions are referred to as concessional contributions and made from pre-tax monies. They are taxed within the Superannuation Fund and count towards the member’s concessional contributions cap of $25,000. Employer’s making the concessional contribution are entitled to a tax deduction.
Personal Concessional Contributions
A member can also contribute to their Superannuation Fund by making a personal concessional contribution. The contribution the member makes to their Superannuation Fund is claimed as a tax deduction in their personal tax return. The amount of the contribution is
- limited to the unused portion of their concessional cap; i.e. $25,000 less the total employer contributions (SGC and salary sacrifice), and
- ensuring the member has sufficient taxable income to offset the tax deduction, i.e. contribution, in their personal tax return.
If claiming a tax deduction for a personal concessional contribution, the member must have a ‘Notice of Intent to Claim or Vary a Deduction’ form, and a written acknowledgement of the Notice of Intent from the Superannuation Fund. Concise Super can prepare this for you, ensuring you have the appropriate documentation for your personal tax return and Self Managed Superannuation Fund.
Carried Forward Unused Concessional Contribution
Where a member has a total superannuation balance of less than $500,000 as at 30 June 2019, the Superannuation Fund may receive concessional contributions above the concessional cap of $25,000. This strategy is applicable from 1 July 2019. The excess contributions are limited to the member’s unused concessional contribution cap for 2018/2019. For further information refer to the utilising the carried forward unused concessional contribution strategy article.
2. Non Concessional Contributions
A non concessional contribution is made by a member to their Superannuation Fund from after-tax monies. The contribution is not taxed in the Superannuation Fund.
A contribution of up to $100,000 can be made to the Superannuation Fund each year for members under the age of 65.
A Superannuation Fund cannot receive non concessional contributions for a member who has a total superannuation balance of $1.6 million or more, at the end of the previous financial year, i.e. 30 June 2019.
Members over the age of 65
Members over the age of 65 will need to satisfy the work test before they can contribute either, non concessional or concessional contributions. The work test involves the completion of 40 hours worked in any 30 consecutive days.
End of Financial Year Tips
If there is scope to make further contributions, take the necessary steps before you top up your contributions;
- Identify the type of contributions available to you
- Confirm the amount of contributions already made
- Review the contribution cap limits as per above
Some bank accounts have “end of financial year processing cut-off dates”, so when making superannuation contributions ensure the bank transaction occurs well before 30 June. i.e. the contribution must be shown in the account of the Superannuation Fund to take effect! Organise your contribution payments in early to mid June to avoid disappointment.
For self-employed members, be mindful of contributions made through “clearing houses” as they tend to hold on to the funds before processing the payment to the Superannuation Fund. The timing can range between 7 to 3o days.
If you are planning to increase your contributions, please contact us to confirm how much you have already contributed to your Self Managed Superannuation Fund.
For more general information regarding the various types of superannuation contributions, contact Concise Super on 03 9838 3055.
The contribution caps are current for 2019/2020 and may be subject to change.
This information is for general information only and does not constitute financial advice or take into account your personal needs, objectives and financial situation. Before making any decisions, we recommend you seek professional advice.
June 2020 ~ Fabio Salvatore, Concise Super
© Concise Super 2020