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- 1. Get your contributions in before 30 June
- 2. Top up if you applied for early release
- 3. Check your caps before contributing
- 4. Make a non-concessional contribution
- 5. Monitor your Total Super Balance (TSB)
- 6. Ensure you pass the work test
- 7. Boost your spouse’s super balance
- 8. Get your salary sacrifice in place
- 9. Make a downsizer contribution
- 10. Confirm your super income stream payments
This financial year has been a year like no other, so your super and tax affairs may need extra attention. If you start your end of financial year preparations now, when 30 June rolls around you’ll be ready and will have taken advantage of the tax opportunities on offer within the super system.
If you made a withdrawal from your super account under the COVID-19 early release rules last year, it’s also a good time to consider making some extra contributions to get your retirement savings back on track. Your contributions may even be tax deductible.
To help ensure you have maximised the available tax benefits, here’s SuperGuide’s top 10 tips for super savers for the 2020-21 end of the financial year (EOFY).
1. Get your contributions in before 30 June
If you want to have a super contribution counted in the 2020-21 financial year, ensure your super fund receives it by 30 June 2021. This is particularly important if you plan to claim a tax deduction for contributions.
The key date for making contributions is not when you make the payment, but when it’s received by your super fund. Even though many banks and financial institutions now offer instant payments, electronic fund transfers and BPAY can take a number of days to appear in your super account.
2. Top up if you applied for early release
Last year, thousands of Aussies applied for early release of some of their super savings. If you were one of them and your financial position now looks better, why not think about rebuilding your super balance.
Since 1 July 2017, eligible Australians aged under 75 have been able to claim a tax deduction if they make a personal contribution into their super account up to the concessional contributions cap. The contribution is open to employees, the self-employed and investors.
It makes sense to consider a voluntary personal super contribution as you can claim a tax deduction for it. You also pay a maximum tax rate of 15% on investment earnings in your super account, while earnings on your personal investments outside the super system are taxed at your marginal income tax rate (up to 45%).
3. Check your caps before contributing
There are annual caps on how much you can put 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 before making a pre-30 June contribution.
Check whether any payments intended for the 2019-20 year slipped into this financial year to ensure you don’t breach your annual contribution caps.
Confirm with your employer when they will be making their electronic contributions (such as salary sacrifice and SG amounts) to your super fund, so you know whether or not they will hit your super account by 30 June. As your employer is not required to make SG contributions for the April to June quarter until 28 July 2021, don’t automatically assume they will make the contribution during this financial year.
4. Make a non-concessional contribution
Non-concessional (after-tax) contributions are made from money you have already paid tax on and can be a great way to boost your super account if you have spare cash available and you’ve already reached your concessional contributions cap. One advantage is you only pay 15% tax on your investment earnings, which is usually less than you pay on investment earnings outside super.
The general non-concessional contribution cap for 2020-21 is $100,000 (rising to $110,000 from 1 July 2021). Provided your Total Superannuation Balance (TSB) is below $1.6 million on 1 July 2020 and you are under age 67, you can make a contribution. Once you are aged 67 and over, you must meet the work test or the work test exemption to make a non-concessional contribution.
Super fund members under age 65 may also be able to use up to three years of their non-concessional contribution cap this financial year (3 x $100,000 = $300,000) if they meet the eligibility criteria for using a bring-forward arrangement. (Bring forward arrangements generally cannot be started once you reach age 65.)
5. Monitor your Total Super Balance (TSB)
If you plan to make a non-concessional contribution into your super account before EOFY, it’s essential to check what your TSB was on 30 June 2020.
If your TSB was $1.6 million or more on 30 June 2020, you are ineligible to make any non-concessional contributions during 2020-21 without triggering an excess contribution and paying additional tax on your contribution.
6. Ensure you pass the work test
If you are over age 67, it’s essential to check you can meet the conditions of the work test before making additional super contributions prior to 30 June 2021. The work test applies if you are aged 67 and above and decide to make a voluntary personal contribution. If you are, you must have been ‘gainfully employed’ for at least 40 hours in 30 consecutive days during 2020-21 to make a personal super contribution.
If you can’t meet the work test, you may be able to use the one-off work test exemption. This exemption allows people with a TSB below $300,000 to make a contribution in the financial year following the last year they were working without needing to meet the work test.
7. Boost your spouse’s super balance
If the balances of you and your partner’s super accounts are very different, consider submitting a request to split some of your super contribution with your spouse to even them up. 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 2019-20 super contributions if you lodge a request with your super fund by 30 June 2021.
If your spouse has an adjusted taxable income below $37,000, you can also consider making a contribution into their super account to boost their retirement savings – and possibly earn yourself a tax deduction.
Eligible contributions into your spouse’s super account of up to $3,000 may provide you with a tax offset on your tax bill of up to $540. If your spouse’s total income is up to $40,000, you can still qualify for the offset, but the amount will be less.
8. Get your salary sacrifice in place
Now is the time to start talking to your employer about getting a salary sacrifice arrangement in place for 2021-22. Salary sacrifice is an arrangement where part of your before-tax salary is paid into your super account rather than being paid to you as take-home pay. These arrangements can be a tax-effective way to boost your super account, particularly as the concessional contributions cap will be $27,500 in 2021-22.
To be valid, a salary sacrifice arrangement needs to be set up before the start of the new financial year, so ensure you have the arrangement fully documented before 30 June.
9. Make a downsizer contribution
If you are aged 65 or older and have sold your main residence in the last financial year, you may be able to make a downsizer contribution of up to $300,000 ($600,00 for a couple) into your super account before 30 June.
Downsizer contributions allow you and your partner to each make contributions into your super accounts if you owned your home for a minimum of ten years. This one-off contribution isn’t counted towards your annual concessional or your non-concessional contributions caps and is available regardless of your TSB.
10. Confirm your super income stream payments
If you are in the retirement phase and are receiving a super pension, check you have received at least the required minimum pension or transition-to-retirement income stream payment amount during 2020-21.
As a response to COVID-19, the government announced a temporary 50% reduction to the minimum drawdown rates on super pensions. It’s important to check with your super fund or SMSF trustee to ensure you have taken at least your new minimum payment amount, as underpayment can lead to compliance problems.