What should my client consider when making super contributions before EOY? | Accurium

EOY

About this time every financial year, it’s a good time to review any super contribution opportunities for clients. However, since March 2020 there has been high volatility in investment markets, which may have created extra potential for clients to benefit. There have also been changes to super contribution rules over the last few years which are worth reviewing before your client makes a contribution.

Non-concessional contributions

The non-concessional contributions (NCC) cap is $100,000 for 2019/20 and will remain at $100,000 for 2020/21.

The NCC bring-forward cap is $300,000 for 2019/20 and will remain at $300,000 for 2020/21, however it will depend on your client’s total super balance (TSB) on 30 June 2019.

Table 1 – NCC bring-forward provisions for clients 64 years old or younger on 1 July 2019

TSB on 30 June 2019  NCC cap  Cap period (years)
 < $1.4mil  $300,000  3
 $1.4mil to less than $1.5mil  $200,000  2
 $1.5mil to less than $1.6mil   $100,000  1
 $1.6mil +   $0  n/a

Note, a client’s TBS is considered each financial year. A person who has a TSB of $1.6mil or greater on 30 June, has an NCC cap of nil for the subsequent financial year, regardless if they had triggered the bring-forward provisions previously and had unused NCC bring-forward cap space previously.

For clients who are 65-74, they must meet the work test (40 hours gainful employment over a consecutive 30-day period) since 1 July 2019 to be eligible to make an NCC. Clients who were 64 on 1 July 2019, but have since turned 65 this financial year, are still eligible to use the bring-forward provisions but must meet the work test to be eligible to contribute. Clients who were 64 on 1 July 2019, but have since turned 65 this financial year, are still eligible to use the bring-forward provisions but must meet the work test to be eligible to contribute.  

Current draft legislation proposes to change from 1 July 2020 both the work test age restriction to 67 (up from 65) and eligibility for the bring-forward provisions to age 66 or less on 1 July of the relevant financial year (up from 64). However, with parliament next due to sit on 11 August 2020, this measure may not pass parliament before the end of 2019/20. However, on 16 April 2020, Scott Morrison announced that “we will be looking to have a trial week of Parliament in May and that would be returning to the normal business of Parliament”, so we will need to continue to look for developments.

Government co-contribution

Clients who had a TSB less than $1.6mil on 30 June 2019 and will have taxable income $38,564 or less for 2019/20 may be entitled to the $500 Government co-contribution, subject to the 10% eligible income test. The $500 co-contribution reduces for clients with income greater than $38,564 until no Government co-contribution is available for those with income of $53,564 or more.

Concessional contributions

The concessional contributions (CC) cap is $25,000 for 2019/20 and will remain at $25,000 for 2020/21.

Clients age 65 or over will need to meet the work test (40 hours gainful employment over a consecutive 30-day period) to be able to contribute.

Clients who will receive Super Guarantee (SG) contributions from their employer of less than $25,000 in 2019/20, may be able to claim a deduction for their contribution using the ‘Notice of intent to claim or vary a deduction for personal super contributions’ form.

A client must make a personal contribution to their super fund by 30 June 2020, and then must send their completed form to their fund by the earlier of:

  • the day they lodge their tax return for 2019/20; or
  • 30 June 2021.

Catch-up concessional contributions

If clients: 

  • are eligible to contribute to super;
  • have unused CC cap from 2018/19; and
  • their TSB was less than $500,000 on 30 June 2019

then they can effectively add their unused CC cap from 2018/19 to their $25,000 CC cap in 2019/20.

Eligible clients can consider increasing personal deductible contributions and/or salary sacrifice before 30 June 2020.

Concessional contribution splitting

Contribution splitting is a strategy that can help:

  • couples equalise their superannuation benefits;
  • enable superannuation benefits to be accessed sooner where contributions are split to an older spouse;
  • reduce Centrelink assessable assets where contributions are split to a spouse below Age Pension age; or
  • help the spouse with a higher TSB reduce their TSB to potentially enable them to make an NCC or catch-up concessional contributions.

A client can split up to 85% of concessional contributions (up to the CC cap plus any catch-up CCs) where their spouse is less than preservation age, or preservation up to age 64 but not retired.

Clients have until 30 June 2020 to split CCs made in 2018/19, or they can split CCs already made in 2019/20 if they roll over their entire benefit and/or take the entire benefit as a lump sum.


Disclaimer

This information is provided by Accurium Pty Limited ABN 13 009 492 219 (Accurium). It is factual information only and is not intended to be financial product advice, legal advice or tax advice, and should not be relied upon as such. The information is general in nature and may omit detail that could be significant to your particular circumstances. The information is provided in good faith and derived from sources believed to be accurate and current at the date of publication. While all care has been taken to ensure the information is correct at the time of publishing, superannuation and tax legislation can change from time to time and Accurium is not liable for any loss arising from reliance on this information, including reliance on information that is no longer current. We recommend that you seek appropriate professional advice before making any financial decisions.