If you are seeking to maximise your superannuation contributions in 2019/20, please carefully review the limits and information below.
Your contributions must be received in your Fund on or before 30th June 2020.
The reason is two fold to ensure that:
1. You are eligible to claim a deduction in 2019/20 for any personal concessional contributions made;
2. The contribution is counted against your limit for the correct year.
Apart from those with an SMSF, we suggest you make your contributions by no later than 16th June 2020. This is to allow 2 weeks for the contributions to be processed and allocated to your account, particularly as super fund administrators are extremely busy right now processing early release payments under the Covid-19 measures.
Be sure to check the amount of actual contributions already received / due to be received in your super fund this financial year before making any top up contributions as this can trip you up and cause excess contributions tax issues.
Further, if making tax deductible personal contributions, please ensure you submit a Notice of Intention to Claim a Deduction for Super Contributions form to your fund as soon as possible and check to ensure they issue you with an Acknowledgement of Receipt notice. You cannot claim a tax deduction without this receipt from your fund.
1 Regarding the non concessional cap, you may be eligible to ‘bring forward’ up to 3 years of contributions in 2019/20 if you meet certain criteria:
If you are aged 65 to 74 years, you must satisfy a work test in order to be eligible to contribute to super. To satisfy the work test, you must have worked at least 40 hours in a consecutive 30-day period in the 2019/20 financial year before the super fund is eligible to accept your contribution.
Please note that from July 1, 2020, the requirement to meet the work test is being extended from age 65 to age 67.
If you are aged 75 or over, your super fund is only able to accept mandated employer contributions (i.e. superannuation guarantee amounts) on your behalf.
‘Catch Up’ Contributions
A reminder that these rules commenced on 1 July 2018, therefore we are into the second year of ‘catch up’ contributions whereby a person with a super balance of less than $500,000 as at 30 June 2019 is able to make a personal concessional contribution in 2019/20 equal to the unused amount of the $25,000 limit from 2018/19.
For example, John has employer contributions of $15,000 for each of FY 2019 and FY 2020. His total superannuation balance at 30 June 2019 was $380,000. If John has higher than normal taxable income in FY2020, due to say, a capital gain then he can contribute up to an extra $20,000 as a personal concessional in FY2020 to reduce his taxable income. The extra $20,000 comprises $10,000 in unused contributions from FY2019 as well as the top up amount remaining for FY2020 of $10,000.
Minimum Pension Withdrawals
If you are in pension phase, please check to ensure you have withdrawn your minimum pension for this financial year before 30th June 2020. Where these requirements have not been met your fund will be subject to 15% tax on its pension asset investment earnings, rather than being tax free.
Please note, in March 2020, the Government halved the minimum annual payment required for a number of superannuation income streams, including account based pensions for the 2019/20 and 2020/21 financial years.
If you had already drawn your minimum pension payment before the Government announcement, you are not able to put the excess amount back into your super fund unless you are otherwise eligible to make contributions.
We recommend that our SMSF clients contact us if you are not sure of your minimum pension requirement for 2019/20.
Should you require other assistance or advice in relation to the above please contact us below, or call directly on +61 2 9981 2300 or email: [email protected] and your Allan Hall advisor will be able to assist.
Disclaimer: This article contains general advice only and has been prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. The information provided in this newsletter is objectively ascertainable and therefore does not constitute financial product advice. If you require personal advice, please contact us to arrange an appointment with one of our licensed SMSF advisors.