With the end of financial year only a few sleeps away it’s time to start thinking about superannuation contributions. We’ve outlined below some key points to consider.
What are concessional contributions (CCs)?
- Employer contributions (including superannuation guarantee and contributions made under a salary sacrifice arrangement); and
- Personal contributions claimed as a tax deduction.
What is the concessional contribution cap?
The CC cap is $25,000 per financial year.
If an individual has more than one fund, all CCs are added together and counted towards the CC cap.
Personal concessional contribution
Regardless of whether you’re self-employed or an employee earning a salary, you can make one-off contributions to your super, from personal money, and elect to claim a tax deduction.
The important things to remember are:
- This election needs to be processed before the member lodges their tax return or rolls out of their account; and
- This contribution will count towards their CC cap.
Carry forward contribution
FY20 is the first time individuals are allowed to carry forward unused CCs from the previous financial year into this financial year.
For example, if your CCs were $15,000 in FY19 then you have $10,000 of unused CC cap which can be applied in FY20 or rolled forward (for up to 5 years). In this example, the member’s maximum CC limit in FY20 is [$25,000 cap + $10,000 carry forward] = $35,000.
To be eligible the member must have less than $500,000 in super at 30 June of the previous financial year and have unused CC cap available from FY19 onwards.
What are non-concessional contributions (NCCs)?
- Person contributions not claimed as a tax deduction.
- Spouse contributions.
- Excess concessional contributions that are not withdrawn from super.
What is the non-concessional contribution cap?
The NCC cap is $100,000 per financial year.
If an individual has more than one fund, all NCCs are added together and counted towards the NCC cap.
Bring forward rule
Members under age 65 with less than $1.4M in super can bring forward two future years’ of NCC caps and contribute up to $300,000, subject to this rule not being triggered in the previous two financial years.
Despite seemingly flying under the radar for a number of years, the government co-contribution is still available. This is where the government will match NCCs by $0.50 for every $1.00 contributed, up to a maximum NCC of $1,000 (i.e. $500 co-contribution).
To qualify for the co-contribution the member must be under age 71, have less than $1.6M in super, have income of less than $38,564 in the same financial year and have received at least 10% of that income from employment or running a business.
Another lesser utilised contribution strategy is a spouse contribution. If an individual has income of less than $37,000 in FY20 and their spouse makes a NCC on their behalf, their spouse will receive an 18% tax offset, up to a maximum contribution of $3,000 (i.e. $540 tax offset).
This contribution will count towards the NCC cap of the individual receiving the contribution.
Superannuation can be a complex area and the different contribution strategies benefit individuals differently depending on their own circumstances. It is recommended you speak to a financial adviser about your situation if you have any questions.
For more information, please contact your Prosperity Principal Adviser or Associate Director of Financial Services Hamish Landreth on 1300 795 515 or email email@example.com.
These examples contain information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, Hillross Financial Services Limited and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Please contact us if you want more information. Prosperity Wealth Advisers Pty Ltd (ABN 32 141 396 376), Authorised Representative and Credit Representative of Hillross Financial Services Ltd, Australian Financial Services Licensee and Australian Credit Licensee 232 705.