Superannuation Tax Planning Opportunities

Before making any superannuation contributions please discuss this with our office. There are strict eligibility requirements. Most importantly, regardless of the type of contribution being made the Super Fund must receive the contributions before June 30. Transfers and deposits must clear before June 30.

  • The maximum tax deductible contribution for most eligible taxpayers is $30,000 for under-50s and $35,000 for those aged 50-plus, however, both these will decrease to $25,000 per year effective 1 July, 2017.
  • Taxpayers who receive ‘income’ of $300,000 or more in 2015/2016 will have their tax deductible superannuation contributions taxed at 30% rather than 15%. Please note that the definition of ‘income’ is not ‘taxable income’ but is a special definition similar to that used for the Medicare Levy Surcharge.Note that the government has proposed to decrease this income threshold from
    $300,000 to $250,000 per year from 1 July, 2017

If you are turning 60 years of age or more at some time in 2015/2016

  • You may be eligible to commence a tax free Transition to Retirement Pension (TTR) without stopping work. In addition, investment earnings on the amount in your superannuation pension account when you start the pension will also be tax free. For this reason you may wish to have an effective pension start date of 1 July 2015. If so, you need to tell your Superfund before 30 June 2016. Amounts withdrawn after your 60th birthday could be tax free.

  • Superannuants who are aged 55 to 59 may also be eligible to commence a TTR pension but may pay tax on some of the superannuation pension received.

Non-Concessional Contributions

Superannuation Reform Changes Effective Budget Night – 7.30pm (AEST) 3 May 2016

New lifetime cap for non-concessional superannuation contributions

  • The government will introduce a $500,000 lifetime non-concessional contributions cap. 
    The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007 (i.e. from the 2008 income year) and will be indexed in $50,000 increments in line with average weekly ordinary times earnings.

    If an individual has exceeded the cap prior to commencement date (being 7.30 pm (AEST) on 3 May 2016 (i.e. Budget night)), they will be taken to have used up their lifetime cap but will not be required to take the excess out of the superannuation system.

    However, if after commencement, an individual makes non-concessional contributions that cause them to exceed the cap, they will be notified by the ATO and must withdraw the excess from their fund. Individuals who choose not to withdraw contributions will be subject to penalty tax.

    It is important to be aware that the lifetime non-concessional contributions cap will replace the existing non-concessional contributions cap, which allow non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65).

  • Individuals aged over 65 need to meet a ‘work test’ to make any contributions and cannot use the bring-forward provisions.

Spouse Contributions

If you have a spouse who has an Adjusted Taxable Income (ATI) of less than $10,800 then you can obtain a maximum tax offset of $540 for a spouse contribution. The tax offset decreases as your spouse’s income exceeds $10,800 and cuts off when their income is $13,800 or more. Your spouse must be under 70 years of age.

Government Co-Contribution

If your adjusted taxable income (ATI) is less than $35,454 you can make a non-concessional contribution of up to $1,000 and the Government will match this contribution with a co-contribution of 50% of the amount you have contributed. This tapers out at $50,454. To be eligible, individuals must earn at least 10% of their income from carrying on a business or as an employee, be a permanent resident of Australia and be under 71 years of age at the end of the financial year.

SuperStream reporting of Superannuation Contributions

A new system of electronically reporting superannuation contributions has been introduced and employers now have until 30 June 2016 to fully implement the SuperStream system. It is important that you comply with the regulations as soon as possible and employers will need to obtain the necessary electronic service addresses from your employees for reporting contributions.

For Trustees of Self-Managed Superannuation Funds, it is necessary to obtain an Electronic Service Address that can receive the necessary electronic information. 

Other 2016 Year End Tax Planning Opportunities

Disclaimer: This newsletter contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.