Let’s talk about superannuation – it’s one of our favourite topics!
Okay, you might not get as excited about superannuation as we do. But there are a number of recent changes to the tax treatment of super that we think you should be aware of.
To help you get the most out of your retirement savings and avoid any unexpected pitfalls, we’ve outlined some of the major developments here.
Mind the new contributions cap
Concessional (pre-tax) contributions include:
- employer super guarantee contributions
- contributions you make under a salary sacrifice arrangement
- personal contributions for which you claim a tax deduction
Effective 1 July 2017, these contributions are capped at $25,000 for everyone, regardless of age.
This is a reduction from the previous caps of $35,000 for people 49 years and older, and $30,000 for everyone else.
If you exceed the new cap, you will have to pay extra tax.
Avoid paying extra tax by checking that your concessional contributions do not exceed $25,000 for the year ending 30 June 2018.
Carry-forward unused amounts
The good news is that, from 1 July 2018, you may be able to carry-forward any unused concessional contribution cap amounts.
Unused amounts can roll over for up to five years, meaning your cap can be up to $125,000 in a five-year period.
Note, to take advantage of this carry-forward provision, your superannuation balance must be less than $500,000 at 30 June of the previous financial year.
Explore taking advantage of the carry-forward provision to boost your super savings as funds become available.
Tax deductions for personal contributions
From 1 July 2017, most people under 75 years of age will be able to claim a full tax deduction for personal¹ superannuation contributions. People aged between 65 and 75 years will need to meet the work test².
In past years, people were only able to claim a tax deduction for personal contributions to superannuation if less than 10 percent of their income came from salary and wages. This effectively limited tax deductions to the self-employed.
This “10% maximum earnings condition” has been lifted, effective 1 July 2017, providing greater flexibility for personal superannuation contributions.
Check that you meet the complying-fund and age restrictions before claiming a tax deduction for personal contributions.
Notice of Intent to Claim
If you do want to claim a tax deduction for personal contributions it is important that you provide your fund with a Notice of Intent to Claim within the required timeframe. A Synectic adviser can help you with this.
To make sure you can validly claim a deduction for the entire contribution:
- You must still be a member of the fund
- The fund must still hold the contribution
- Your fund must not have started paying a super income stream using any of the contribution
- Your super fund must also acknowledge your Notice of Intent, in writing
If you plan to claim a deduction, lodge a notice of intent with your super fund and have this notice acknowledged by your fund, in writing.
Find out more
These are just some of the recent changes for you to consider. If you would like to know more or would like some help, we welcome you to talk to one of our tax and super specialists.
¹ Personal super contributions are amounts paid into your super fund from your after-tax income. They exclude contributions made under a salary sacrifice arrangement, and compulsory super paid by an employer.
² The work test means that to be eligible to make personal after-tax contributions, you must have been employed for at least 40 hours over 30 consecutive days during the financial year.
The above summary is general in nature and is not intended as tax or financial advice. The above concessions have various eligibility requirements and restrictions and you should consider your own objectives, financial situation, and needs before acting on this information. We recommend that you seek advice about your specific situation from a qualified accountant and/or financial adviser.