As we approach the end of another financial year, have you stopped to consider what you can be doing to tax effectively manage your super?
Making a Contribution
The contribution limits for year ending 30 June 2021 are as follows:
|Contribution Type||Contribution Cap|
|Concessional contributions cap |
(tax deductible contributions)
|Annual Cap = $25,000|
|Non-concessional contributions |
|Annual Cap = $100,000 |
If individual has less than $1.6m in total super at 30 June 2020
|Non-concessional contributions |
|3 Year ‘Bring Forward’ Cap = $300,000 |
If individual aged under 65 and has less than $1.6m in total super at 30 June 2020
- The work test age has increased to 67 (previously 65).
- If you are aged between 67 and 75 you must satisfy a work test (40 hours of paid employment in a 30 day period) before making a contribution
- Does your total super balance exceed $1.6m? Check your total super balance at 30 June 2020 to determine your eligibility before making a non-concessional contribution
- Contributions made by EFT or BPAY are not deemed to have been made until the contribution appears in your super fund’s bank account. This could be some days after you initiate the transfer. Ensure contributions are physically received by your super fund prior to 30 June 2021.
- Ensure any contributions made are within your contribution limits, particularly after taking into consideration any contributions already made your employer(s).
Are you over 65 and considering selling your home?
Individuals aged over 65 who have sold their longstanding principal place of residence, may be eligible to contribute up to $300,000 to their Super Fund (without having to satisfy the work test).
The downsizer contribution does not count towards your non-concessional contribution cap and can still be made if you have a total super balance greater than $1.6 million.
Carry-forward Unused Concessional Contributions
If you have a total superannuation balance of less than $500,000 at 30 June 2020, you may be entitled to make ‘carry-forward’ concessional contributions in addition to the annual $25,000 concessional contributions cap. Unused amounts of your concessional contributions cap accrued from the 2018/19 financial year can be carried forward for a maximum of 5 years.
For further information, please refer to article published in the June 2020 edition of the Davidsons newsletter here.
Satisfying the Pension Requirements
If you are receiving a pension from your Super Fund, you must withdraw a pension that is within the applicable minimum and maximum limits prior to 30 June 2021.
Due to the pandemic, the ATO temporarily reduced the minimum annual pension requirements by 50%. The reduced minimum applies for both the 2020 and 2021 financial years.
If the annual pension drawn is outside of the minimum and maximum ranges, the pension requirements will not be met and your superannuation pension balance will revert back to “accumulation phase” where all income and capital gains are taxed at 15%.
Members also need to be careful to not exceed their maximum pension as penalties apply for illegal early access to superannuation benefits.
Do you have a Self Managed Superannuation Fund?
If you operate a Self Managed Superannuation Fund (SMSF), prior to 30 June 2021 it is important to ensure:
- any prior year management points raised by your auditor have been addressed
- you have obtained market valuations for any unlisted investments owned by the SMSF
- the SMSF’s investment strategy has been reviewed and minuted
- any property trust profit distributions owing to the SMSF from the 2020 financial year have been paid
- your SMSF has been complying with ATO Event Based Reporting requirements which are applicable in instances such as commencing / stopping a pension and withdrawal of certain lump sums
Should you require any assistance with your superannuation year end requirements, please contact Simon Abbott on 03 5244 6867.
The information that provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.
Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.