- 1. Don’t leave contributing until the last minute
- 2. Don’t go over your contributions limits
- 3. Don’t forget the opportunity to make a tax-deductible contribution
- 4. Don’t forget to submit your paperwork
- 5. Don’t forget you can carry-forward your concessional cap
- 6. Don’t forget to check your TSB before making a non-concessional contribution
- 7. Don’t forget about your other half
- 8. Don’t forget to review your death benefit nomination
- 9. Don’t forget to lodge you tax return and TFN
- 10. Don’t forget about the work test
With only a few weeks remaining before the end of the 2018/2019 financial year, it’s time to ensure you have your super affairs in order and all your paperwork is ready for the big day when you lodge your income tax return.
To help ensure you have maximised the tax benefits available within the super system, here’s SuperGuide’s top 10 tips for this year’s financial year-end (EOFY).
1. Don’t leave contributing until the last minute
For your super contributions to be counted in the 2018/2019 financial year, they must be received by your super fund within that financial year. This is particularly important if you plan to claim a tax deduction for any of your contributions (see section below).
The key date for making contributions is not when you make the payment, but when it’s received by your super fund. This year 30 June is a Sunday, so don’t leave making your payment until 27 or 28 June, as your fund may not receive your contribution or clear it until the following Monday, which is 1 July and the first day of the new financial year (2019/2020).
Even though many banks and financial institutions now offer an instant payment system, electronic fund transfers and BPAY can take a number of days to appear in your super account. Don’t take the risk and be sure to you make your payment early.
Super tip for employers
Employers only receive a tax deduction for making their employee SG contributions in the same financial year in which the SG contributions are received by the super fund.
So, ensure you make your payments well before 30 June if you want to claim a deduction for them in the 2018/2019 financial year.
Contributions are considered paid when the super fund receives them. Missed payments may attract the super guarantee charge (SGC), which is not tax-deductible. For more information, see the ATO website here.
For more information on super contributions, see SuperGuide article What super contributions are best for me?
2. Don’t go over your contributions limits
There are annual caps on how much you can contribute into your super account, so it’s essential to monitor the total amount of both your concessional (before-tax) and non-concessional (after-tax) contributions across all your super accounts if you are thinking about making a contribution close to financial year-end.
If you go over your caps, you could be required to pay extra tax. For more information, see SuperGuide article What to do if you exceed your super contributions caps.
The key contribution caps for 2018/2019 are $25,000 for concessional contributions and $100,000 for non-concessional contributions. Don’t forget that your concessional (before-tax) contributions include all your employer’s SG contributions, salary sacrifice amounts and any personal contributions for which you claim a tax deduction.
Also check whether any payments intended for the 2017/2018 year slipped into this financial year (2018/2019), putting you at risk of breaching your contributions cap.
Confirm with your employer when the electronic payment of contributions (e.g. salary sacrifice and SG amounts) will be made, so you know whether or not it will hit your super account by 30 June. Employers are not required to make SG contributions for the April to June quarter until 28 July 2019, which is in the next financial year.
For more information, see SuperGuide articles 2018/2019 guide to concessional contributions (before-tax super contributions) and What to do if your employer doesn’t pay your super.
3. Don’t forget the opportunity to make a tax-deductible contribution
Since 1 July 2017, Australians aged under 75 can claim an income tax deduction for personal contributions up to the concessional contributions cap if they meet the eligibility criteria. Investors and the self-employed can also claim this tax deduction, as your income can come from salary and wages, a personal business, investments, government pensions or allowances, super, partnership or trust distributions and a foreign source.
These super contributions can be worthwhile considering, as earnings on your super are taxed at a maximum of 15%, whereas earnings on personal investments outside the super system are taxed at your marginal income tax rate (up to 45%).
For more information, see SuperGuide articles Guide to tax-deductible superannuation contributions and 2018/2019 guide to concessional contributions (before-tax super contributions).
4. Don’t forget to submit your paperwork
If you plan on claiming a tax deduction for a personal super contribution, ensure you submit a Notice of intent to claim or vary a deduction for personal contributions form to your super fund so it converts your super contribution into a concessional contribution. Unless you tell your super fund otherwise, it will assume your personal contributions are non-concessional (after-tax) contributions and you will not be able to claim a tax deduction.
If you want to claim a tax deduction for super contributions you made in 2018/2019 in your income tax return this year, you will need to submit your Notice of intent form before you lodge your tax return.
Once your super fund receives your Notice of intent form, it will provide an acknowledgement confirming the contribution has been recorded as a concessional contribution and it can be claimed in your tax return. This acknowledgement is an essential part of the process and if your don’t receive a response noting the amount you can claim, you may miss out on the tax deduction.
Note: If you plan to start a retirement pension or income stream from your super savings, ensure you submit your Notice of Intent form before commencing a super pension. Many people like to start their pension in June so they can avoid having to take a minimum pension payment, so ensure you have submitted your form or it will not be accepted once the pension commences.
To be eligible for a tax deduction, you must also not have applied to split the super contributions or given notice under the First Home Super Saver Scheme (FHSSS).
For more information, see SuperGuide article Guide to tax-deductible superannuation contributions and 2018/2019 guide to concessional contributions (before-tax super contributions).
5. Don’t forget you can carry-forward your concessional cap
From 1 July 2017, the super rules were changed to allow fund members to use any of their unused concessional (before-tax) contributions cap on a rolling basis for five years. This means if you don’t use the full amount of your $25,000 concessional contributions cap in 2018/2019, you can always carry-forward the unused amount and take advantage of it up to five years later. (Any amount not used after five years expires.)
Generally the same rules apply to carry-forward contributions as normal concessional (before-tax) contributions, including the age-based limits. This means individuals under the age of 65 and those aged 65 to 74 who pass the work test can make carry-forward contributions.
If you are thinking about taking advantage of the carry-forward rules in the new financial year (2019/2020), it’s important to note that your Total Super Balance (TSB) must be under $500,000 on 30 June 2019.
For more information, see SuperGuide article Carry-forward contributions: How your unused contributions cap can help you catch up.
6. Don’t forget to check your TSB before making a non-concessional contribution
If you plan to make a last minute non-concessional (after-tax) contribution into your super account before financial year-end, it’s essential to check what your Total Superannuation Balance (TSB) was on 30 June 2018.
Many people consider making a large non-concessional (after-tax) contribution before the EOFY if they have sold some investments, received an inheritance or sold a business, as the contributions cap for non-concessional contributions is a more generous $100,000 (2018/2019).
If your TSB was $1.6 million or more on 30 June 2018, however, you are not eligible to make any non-concessional contributions in the current financial year without triggering an excess contribution and paying additional tax on the contribution.
If your TSB is below the limit, making non-concessional contributions can be an easy way to move investments into the lower taxed super system and out of your personal, company or trust name as a way to help control your tax bill.
If you will be under age 65 on 30 June 2019 and your TSB was below $1.6 million, you may also be able to take advantage of the bring-forward provisions in the super rules that allow you to make a non-concessional contribution of up to $300,000 in a single financial year.
For more information, see SuperGuide article A super guide to understanding the bring-forward rule.
7. Don’t forget about your other half
Financial year-end is a good time to analyse how your finances are going as a couple or family, and your retirement savings are a key area to review. If the balances of your super accounts are very different, consider submitting a request to split some of your super contribution with your spouse as a way to even up your super accounts.
Requests to split need to be made by 30 June of the financial year following the year the contributions were made, so you can split some of your 2017/2018 super contributions if you lodge a request with your super fund by 30 June 2019.
Under the contribution splitting rules, you can split up to 85% of your prior year’s concessional (before-tax) contributions with your spouse. Over the long-term this can help equalise the balance of your super accounts and increase the amount you and your spouse have in the retirement phase. Under the Transfer Balance Cap rules, both members of a couple can have up to $1.6 million in the retirement phase, so together you could have up to $3.2 million tax-free at retirement.
If there is a big age difference between you and your partner, splitting contributions towards the older spouse may also mean you can access some of your tax-free super sooner.
For more information, see SuperGuide article Contribution splitting: How to boost your spouse’s super.
8. Don’t forget to review your death benefit nomination
When you review your super plans and account balances, year-end is also a good time to ensure the person you have nominated to receive your death benefit remains the right one. (Remember, your superannuation benefit doesn’t default to your estate when you pass away and is not covered by the provisions of your will.)
If there have been big changes in your life – a separation, divorce or new family member – your current benefit nomination may no longer be appropriate. This is particularly important if your relationship has broken down and you no longer want your ex-partner to receive part of your super benefits.
If your adult children have left home or are no longer financially dependant on you, you may want to reconsider a death benefit nomination made in their favour, as there are tax implications if a super death benefit is paid to a non-financial dependant. Generally, under the tax rules, a non-financial dependant does not receive the concessional tax treatment given to dependants if they receive a super death benefit.
For more information, see SuperGuide article Death and taxes: Guide to superannuation death benefits.
9. Don’t forget to lodge you tax return and TFN
The ATO uses your previous year’s tax return to calculate your total income for determining eligibility for both co-contribution and Low Income Superannuation Tax Offset (LISTO) payments, so if you haven’t lodged a return you may not receive the right – or any – amount of co-contribution or LISTO into your super account. This is particularly important if you have income from sources other than normal employment such as a partnership or director fees.
You also need to ensure your super fund holds your tax file number (TFN) on file, as it will not be able to accept a co-contribution or tax offset payment from the ATO in the upcoming financial year (2019/2020) if it does not have your TFN.
Note: Take care if you are claiming an income tax deduction for personal super contributions if you would like to receive a co-contribution payment from the government.
Personal super contributions claimed as a tax deduction are not considered eligible contributions for calculating the super co-contribution. If you want to receive a co-contribution, you may need to choose between a co-contribution payment and a tax deduction, as you cannot receive both.
For more information, see SuperGuide articles Gaining from the government: how you can score a co-contribution freebie and Learn to love LISTO: Low income earners get their super tax refunded
10. Don’t forget about the work test
If you are over age 65, it’s essential to check you can meet the conditions of the work test before making a super contribution prior to 30 June 2019.
The work test applies if you are aged 65 and above when you decided to make a voluntary contribution into your super account. Under the work test rules, you must have been ‘gainfully employed’ for at least 40 hours in 30 consecutive days during 2018/2019 if you wish to make a personal super contribution.
Once you reach age 75, you will not be able to make non-concessional contributions, regardless of your work status. You can only claim a tax deduction for any super contributions you made before the 28th day of the month following the month in which you turned 75.
For more information, see the following SuperGuide articles: