Tag Archive: Non-Concessional Contributions

1. Happy Financial New Year 2022!

   July 15, 2022 12:12 pm Comments Off on Happy Financial New Year 2022!

   Welcome to our latest newsletter, End of Financial Year Edition, in which we provide you with a brief checklist of items to consider.

   Contributions

   A brief reminder of some of the types of contributions you may have the opportunity to make by 30 June 2022:

   • Concessional contributions up to $27,500 pa;
   • Non-concessional contributions (so long as Total Super Balance at 30 June 21 is less than $1.7m) – the cap is $110,000 pa;
   • Access the bring forward rules – up to $330,000 if eligible;
   • Access unused concessional contributions (30 June 2021 Total Super Balance must be less than $500,000)
   • Spouse contributions (rebate maybe applicable);
   • Contributions using the one-off work test exemption (30 June 2021 Total Super Balance must be less than $300,000).

   Pensions

   It is important for members to reconcile all pension payments received from their SMSF retirement income streams since 1 July 2021 to ensure that there is no underpayment of the minimum pension payment required to be taken by 30 June 2022. If members do not withdraw the minimum pension required, then the SMSF will lose some or all of its tax exemption, and the relevant pension account will have to be rolled back to accumulation mode.

   If you are unsure what your minimum pension requirement is, please contact us so that we can assist you in this regard. We are working through every fund to check in on this as we speak.

   Valuations

   It is a requirement that all SMSF assets be valued at market value for reporting purposes. Whilst this is a simple process for listed securities, it can be quite complicated and time consuming to determine the market value of unlisted investments.

   We recommend that all SMSFs that have either direct property or indirect investment in property via unlisted structures commence the process of getting updated market valuations as soon as possible so that the 2022 year end work is not held up. To note this does not have to be formal valuations but must be based on comparable sales data.

   Some important changes from 1 July 2022

   Contributions

   • Individuals up to the age of 75 will no longer have to meet a work test to make voluntary, non-deductible contributions;
   • The bring forward rule will be extended to individuals up to the age of 75;
   • The minimum age to make downsizer contributions will reduce to 60.

   work test

   Currently, a member aged 67 to 74 can only make voluntary contributions to super if they have worked at least 40 hours over 30 consecutive days in the financial year. This work test must be met prior to them contributing.

   From 1 July 2022, this work test will only apply to a member who wants to claim a tax deduction on voluntary contributions made to super. This means that the work test will no longer apply to any of the following contributions:

   • Non-concessional contributions
   • Spouse contributions
   • Salary sacrifice contributions

   Further, where a member does make personal deductible contributions, they will be able to satisfy the work test at any time in the financial year.

   miscellaneous

   • The Superannuation Guarantee rate will increase to 10.5% pa;
   • The $450 minimum monthly threshold to be entitled to received Superannuation Guarantee will be removed;
   • Under the First Home Super Scheme eligible individuals will have access to an extra $20,000 of voluntary contributions to fund a home deposit (an increase from $30,000 to $50,000).

   

   As always, don’t hesitate to contact one of the friendly Greenlight Super Services team members if you require further assistance on (02) 6273 1066 or info@glss.com.au.

   This newsletter is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The newsletter has been prepared without taking in to account any personal objectives, financial situation or needs. The information contained is correct as of 6 June 2022

2. February 2022 update

   March 7, 2022 9:10 am Comments Off on February 2022 update

   Welcome to our first update for 2022, in which we outline the key super measures that have recently been passed by both Houses of Parliament. Once Royal Assent is given, most of these changes will apply from 1 July 2022

   Changes to the Work Test

   The work test requires individuals over the age of 67 to be gainfully employed for a minimum of 40 hours in a 30-day consecutive period. This definition has not changed – what has changed is when the work test needs to be applied.

   The rules for members aged 67 to 75 are essentially as follows:

   Current Rules	New rules from 1 July 2022
   Members wishing to make personal deductible contributions must satisfy the work test.	No change to this rule.
   Members must satisfy the work test in order to be able to make non-concessional contributions up to the annual cap of $110,000 or to make salary sacrifice contributions.	The work test no longer needs to be satisfied to make non-concessional contributions up to the annual cap of $110,000 or to make salary sacrifice contributions.

   Note: that there are no changes to the contribution rules for members over the age of 75 – they can still only receive mandated contributions (generally the Superannuation Guarantee amount of 10% or some other amount as dictated by an industrial award).

   At this point, it may be worth the reminder that from 1 July 2021 the concessional contributions cap increased from $25,000 to $27,500, and that the non-concessional contributions (‘NCCs’) cap increased from $100,000 to $110,000. Eligibility to make NCCs is still subject to being below the Total Superannuation Balance cap as at the 30 June prior (the cap was $1.6m up to 30 June 2021, $1.7m from 1 July 2021).

   Bring Forward Rules

   Removing the work test for NCCs has the flow on effect of extending the opportunity to use the bring-forward provisions. What this means is that members up to the age of 75 (previously 67) are now eligible to make use of this provision.

   There is no change to the fact that an individual’s capacity to make use of this rule is impacted by their Total Superannuation Balance – as per the following table:

   Total Superannuation Balance	NCCs and bring forward available (from 1 July 2021)
   Less than $1.48 million	3 years ($330,000)
   $1.48 – < $1.59 million	2 years ($220,000)
   $1.59 – < $1.7 million	1 year ($110,000)
   $1.7 million or more	Nil

   Downsizer contributions

   The eligibility age to make downsizer contributions will reduce from 65 to 60 years of age.

   The two most significant issues with reducing the age of eligibility are:

   • that anyone who contributes prior to the age of 65 will have to meet a condition of release to access the benefit; and
   • those who use it early will need to consider how the contribution impacts other contribution strategies (an individual’s capacity to make a downsizer contribution is not impacted by their Total Superannuation Balance, whereas the capacity to make non-concessional contributions is, so careful planning may be required).

   Other measures

   Exempt Current Pension Income (‘ECPI’)

   Trustees will be able to choose their preferred method of calculating ECPI (proportionate or segregation) when they have member interests in both accumulation and retirement phases for part, but not all, of the income year.

   Unlike all the other measures passed, this one comes into effect from 1 July 2021.

   First Home Super Saver Scheme (‘FSSS’)

   The maximum allowable withdrawal that can be made under the FHSSS will increase from $30,000 to $50,000 for anyone that requests a determination from 1 July 2022. More information about the scheme can be found here.

   Superannuation Guarantee Eligibility – Income Threshold Removed

   The $450 per month income threshold under the which employees do not have to be paid the superannuation guarantee by their employer will be removed. This is expected to improve equity in the system for casual and part-time workers.

   As always, don’t hesitate to contact one of the friendly Greenlight Super Services team members if you require further assistance on (02) 6273 1066.

   This newsletter is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The newsletter has been prepared without taking in to account any personal objectives, financial situation or needs. The information contained is correct as of 17 February 2022.

3. 2016 Superannuation Reforms passed both houses

   November 23, 2016 3:51 pm Comments Off on 2016 Superannuation Reforms passed both houses

   Superannuation legislation proposed end of September 2016 have passed through both houses of parliament today. These make significant changes to the superannuation laws and do differ from the original changes announced in the Federal Budget in May 2016.

   The below changes will apply from 1 July 2017 so it might be sensible to for you to start thinking about how your superannuation and retirement planning will be impacted by the changes now and whether you need to change any of your super arrangements.

   Changes in the legislation which you might need to consider include:

   • The new $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase from 1 July 2017.
     • Note – this includes defined benefit funds in the assessment eg CSS/PSS pensions
   • Contributions
     • The lower contribution caps for all taxpayers applying from 1 July 2017.  The new caps will be:
       • Concessional contributions (pre-tax contributions) — $25,000 per year.
       • Non-concessional contributions (after-tax contributions) — $100,000 per year
     • Revised limit of $300,000 on the bring forward provision of 3 years’ worth of contributions to a single year. However to note:
       • If you have triggered but not utilised the whole amount of the $540,000 limit in 2015-2016 or 2016-2017, the balance left to contribute needs to be reviewed carefully as a reduced limit may apply.
       • If you have super balances exceeding $1.6 million you will no longer be able to make non-concessional contributions post 1 July 2017.
   • Reducing the income threshold at which individuals are required to pay an additional 15 per cent contributions tax, from $300,000 per year to $250,000.
   • Removing the tax-free treatment of assets that support a transition to retirement income stream.

   From 1 July 2018 the following change will apply:

   • Individuals with balances of less than $500,000 will be able to ‘carry forward’ unused concessional cap space for up to five years. This will provide greater flexibility for those with broken work patterns.

   How can we help?

   The above legislative changes will most likely have an impact on your circumstances if you have a superannuation balance close to or over $1.6 million, were planning on making significant contributions to superannuation in the next few years, are a high income earner or have a transition to retirement pension in place now.

   If you would like to discuss your particular circumstances in more detail as a result of the above please do not hesitate to contact us to arrange a meeting.

4. Superannuation Guarantee frozen until 2021

   August 24, 2014 10:16 am Comments Off on Superannuation Guarantee frozen until 2021

   The government has just announced that it had been successful in gaining support for the repeal in the Mining Tax Tax, but with that comes a freeze on the increase in Superannuation Guarantee Contributions (SGC). Until this year’s budget, the Labor government had SGC reaching 12% by 2019. This change sees it staying at 9.5% until 2021 before increasing in 0.5% increments until 2025. Adding fuel to the fire is suggestion that with the change comes increased powers to current and future Treasurers, allowing them to make further changes to this without parliamentary approval.

   The bad news in this of course is the fact that our compulsory retirement savings will potentially fall further short of where they need to be to fund future retirement income needs. This comes at a time when the government has also increased the Age Pension age to 70 for those born after 1966, and there are grave concerns for the nation being able to fund our ageing population.

   The good news in all of this is that for the large percentage of people on Total Remuneration Packages (TRP), it means that the money stays in “take home pay” and can fund current debt and lifestyle needs. This “take home pay” though is of course taxed at Marginal Tax Rates, which for many people is far higher than the 15% that superannuation enjoys. Take someone earning $150,000 a year. If they contributed 12% to super instead of 9.5%, the tax saving would be $900 per year. That $900 saved year and invested, (assuming a 12% return incl CPI) over 15 years is over $31,000.

   
   With contribution caps now making it difficult to contribute to super later, the smart money will likely look to increased Salary Sacrifice strategies to make up likely income shortfalls later. For more about Salary Sacrificing, check out the ATO Website, and keep an eye out for next month’s Super Vision where we’ll explore the benefits in more detail.

5. Last Minute Tax Savings Before 30 June

   June 16, 2014 8:29 pm Comments Off on Last Minute Tax Savings Before 30 June

   June 30 falls on a Monday this year, which given bank timings, really means that Friday 27^th should be what you consider the deadline for this year…  If you’re keen on saving some tax just before the deadline, here’s some Super ways to do it!

   Pre-Tax Contributions (Personal Deductions and Salary Sacrificing)

   If cashflow permits, the most tax effective means of saving for most people in higher income brackets is to reduce total taxable income AND pay the lower 15% contributions tax on the way into the Super environment.

   Of course, given the age at which you can then access Super is somewhere between 55 and 60, the closer you are to this number, the more attractive an option it seems.

   But the government does limit how much of a good thing you can have by imposing “Contribution Caps”.  So to work out how much you can contribute this year, do these 2 things:

   – You’ll need to know what your employer has already contributed on your behalf.  If they are paying standard Superannuation Guarantee Contributions (SGC), it should be 9.25% of your total salary including bonuses, up to a maximum of $17,774.80. But it is best to check your latest Pay Slip or Superannuation Online portal if you have one. Once you know this amount, subtract it from the below “Caps” and that is how much you can still contribute up to. Note the age thresholds and caps change for next year, so for more details see our Post Budget Ready Reckoner

   Year	Aged under 59 @ 1/7/13	Aged 59 and over @ 1/7/13
   2013-14 (now)	$25,000	$35,000

   – You can also use this calculator provided by the Australian Securities & Investment Commission (ASIC) to work out how best to allocate any excess cashflow that you have, and what tax the additional contributions will save you.

   

   If you are self employed, June is the most common time to assess cashflow and make the contribution, bearing in mind that in order to claim the contribution (to be tax deductible) any income received as an employee (being “overall assessable income PLUS super contributions (ex SGC) PLUS reportable fringe benefits”) needs to be less than 10% of your total assessable income for the year.

   If you’re employed, you may find it difficult to forego a large amount of salary, or get your employer to help you out at this late stage, but you should consider monthly amounts for 2015 while you’re thinking about it!

   After-Tax Contributions (Non-Concessional Contributions)

   The government also limits how much Super you can contribute after tax, which has meant that the days of leaving savings outside of super until the last minute are all but gone.  For 2013/14, the caps are the same:

   Year	Limit per year*	Over 3 years (referred to as “bring forward rule”)**
   2013-14	$150,000	$450,000

   The 3 year “bring forward rule” means that you can effectively contribute 3 years’ worth of contributions today, and then not contribute any more for 3 years.  This can be done anytime, but many people leave it until the last minute before retirement and then realise just how good the tax savings are!  If you’re near 65 and/or retiring, timing becomes critical and somewhat complicated:

   1. Once you get to age 65, you need to meet a work test of 40 hours or more in a 30 day period in order to make a contribution and can only contribute the annual amount each year ie $150,000
   2. Therefore if you’re under 65 and no longer working you may want to contribute $150,000 per year and then use the 3 year rule opportunity as close to age 65 as possible
   3. Once you reach age 75 no further contributions can be accepted by a super fund unless they are the super guarantee amounts ie 9.25% of salary

   Here’s is an illustration of how to get as much into super before age 65 to maximise tax free income in retirement.  It’s all about not using the “3 year bring forward rule” too early.

    

   

   To complicate matters further, next year the Non-Concessional Caps actually increase, and so where possible, you would hold off using the “3 year bring forward rule” until the 2014-15 tax year to take advantage of the extra $90,000.

   Year	Limit per year*	Over 3 years (referred to as “bring forward rule”)**
   2013-14	$150,000	$450,000
   2014-15	$180,000	$540,000

    Use next year’s Caps to offset this year’s Tax Liabilities

   Although not commonly understood individuals or employers can actually contribute beyond this year’s concessional cap, claim a tax deduction this year, but have the super fund allocate the second contribution (which must be made in June as a separate deposit) to next year’s cap prior to 28 July.  It’s done by holding the portion to be allocated to the next financial year in a contribution reserve account on the basis it has not been allocated to a specific member.  If the contribution is a “member concessional contribution” they need to complete a Notice of Intent to Claim a Tax Deduction in order to claim this second contribution in the year it was actually funded.  This strategy can be used to offset significant tax liabilities that fall this year, such as the capital gains tax on a business or property investment.

   

   The above case assumes the client is aged over 59 this financial year, therefore accessing the $35,000 Cap for both years.  See the Post Budget Ready Reckoner for the increases next year for those aged over 49.

   Off Market Transactions

   Contributions can also be made using “in-specie contributions” or transfers of physical assets without selling down.  Although the transaction still triggers Capital Gains Tax, you may be able to avoid a tax liability if your Marginal Tax Rate is nil (because you are in pension phase), or you are able to claim a personal tax deduction on contributions (because you are self employed).

   Tips and Traps:

   – There are restrictions on which assets you can transfer in this way (for example, Listed Shares but not Unlisted Shares, Business Real Property but not Residential Property)

   – You’ll need to be able to determine a market value of the asset being transferred to ensure that it fits within the contribution caps

   – The paperwork trail needs to be implemented correctly as the auditor will likely need to check for dates of the asset transfers matching valuations

   Exempt Current Pension Income Deduction

   Income derived from SMSFs in Pension phase are exempt from paying income tax.  However to ensure the SMSF is entitled to the exemption you must:

   • Check that you’ve met the required minimum pension payments for the year
   • Re-value all assets to their appropriate market value at year end

   If cashflow is an issue in meeting minimum pension requirements, consider whether a “lump sum in-specie payment” of an asset might work.  Even though you can’t actually call the transaction a pension payment itself, new rules now allow a lump sum to be counted towards the minimum pension payments for the year.  Although it is a “workaround”, this can be helpful if you have artwork or other collectibles you want to remove from the super fund and the pension you draw is more than you need. You will need to get an independent valuation of the asset.

   If you need any help getting organised for 27^th June, contact Danielle or Vanessa as soon as possible.  It’s all better in your pocket than the tax offices’!