Superannuation contributions fall into one of two categories – concessional & non-concessional which in the old parlance meant deductible & non-deductible. Both categories of contribution are subject to a ‘contributions cap’ or an annual limit. Contributions that exceed the cap attract penalty tax. It’s therefore important to understand these limits.
Concessional contributions cap*
|Income year||< 60 years||60 years +|
*If you will be 60 years of age as at 30 June 2014 you are eligible for the higher concessional contribution cap of $35,000 for the 2013/14 financial year.
|Income year||1-year cap||3-year cap|
*Whilst the cap in any given year is notionally $150,000, if you are under 65 you can contribute up to $450,000 in a 3-year period. Practically, subject to your contribution history, this means you can make non-concessional contributions of up to $450,000 in the current year, provided you do make further non-concessional contributions in either of the two subsequent years.
Timing is important
To qualify for deduction, concessional contributions must be received and banked by your fund by 30 June. Therefore, beware the 30 June rush at some super fund offices – although you might post your cheque a couple of days beforehand, they don’t always get processed and banked straight away. Best to allow extra time to be safe.
Notice of intention to claim a deduction
Taxpayers that are self-employed or substantially self-employed must issue a valid notice to their super fund of their intention to claim a tax deduction. This must be done before the earlier than the day you lodge your tax return for the year or 30 June the following year. The super fund must acknowledge receipt of your notice.
Minimum pension payments
For those of you that have started a pension or a transition to retirement, remember that there are minimum pension payments that must be made before 30 June each year. The minimum amount varies each year depending on your account balance, so what happened last year is not the right reference point. In June, BridgePoint Group will be contacting all SMSF trustees that are wholly or partly in pension phase to discuss the minimum payment requirements.
TIPS FROM THE TEAM
- Keep in mind – Since 1 July 2012, if you earn more than $300,000/year, your concessional super contributions will be subject to tax at the rate of 30%.
- Your employer’s superannuation contributions DO count toward the concessional contributions cap so be mindful of the cap when making additional contributions.
- If you are over the age of 65 you MUST pass a work test to make super contributions. Call us for more information on this.
- Your accountant thinks about superannuation as a low-tax environment. The less tax you pay, the more you have left to invest and the compounding effect of that over many years can be quite significant.
FOR MORE ABOUT SUPERANNUATION PLEASE CONTACT OUR OFFICE ON 1300 656 141.