Ok, so we’ve covered some of the special super options available to low income earners in the 2020/21 tax year. But there are also other things you might want to consider getting organised before June 30, especially if you are looking to maximise your superannuation savings.
If you plan to make super contributions for the 2020/21 year you will need to get your skates on. The most important date for a super contribution is not when you pay it – but when the super fund receives it. So you need to ensure the contribution is received by your super fund by June 30.
Here are some of the key things to think about.
Make the most of your contribution caps
Getting money into super is a bit more difficult these days so it is important to be contributing to super consistently over the years. As you probably know, there are limits, called contribution caps, to the amount you can contribute to super each year. There is a contribution cap for contributions you make that are paid from money you haven’t paid tax on (called concessional contributions) and one for contributions you make with money you have paid tax on (called non-concessional contributions).
If you haven’t used your contribution caps and you don’t have a better use for the money you might think about making additional contributions into super before June 30.
It’s also worth noting that from the 2019/20 tax year (ie last year) you can ‘carry forward’ your unused non-concessional contribution caps if you have a super balance less than $500,000 for up to 5 years and make use of them in future years. This will help make sure people get the opportunity to use their caps. So if you didn’t use your full non-concessional cap last year and you have some extra money available this year you may be able to use that unused cap form last year.
What does it mean?
The concessional and non-concessional contribution caps for 2020/21 are $25,000 and $100,000 respectively. Have a look at how much of the caps you have used and if you are looking to maximise your retirement savings and don’t have a better use for the money consider putting some extra money into super before June 30. Make sure you don’t exceed the contribution caps or you may have to pay excess contributions charges.
Additional information on contribution caps is available from the Australian Tax Office here.
Making personal super contributions
From the 1st July 2017 most people under age 75 can make a personal, after tax contribution and claim a tax deduction for it. For those between 65 and 75 you will need to satisfy what is known as the ‘work test’ (which is essentially working 40 hours in a 30 consecutive day period) or the work test exemption (which gives people with a super balance less than $300,000 an extra 12 months after they meet the work test to make contributions). Personal contributions are made from your after tax income and will count towards your non-concessional contribution cap unless you claim a tax deduction for them. If you do claim a tax deduction for them they will count toward your concessional contribution cap. If you want to claim a tax deduction for a personal super contribution you need to make the contribution to an eligible super fund and you must give your super fund a special form called a Notice of intent to claim or vary a deduction for personal super contributions – by the time you lodge your tax return or the end of the year after the year during which you made your contribution.
What does it mean?
If you are trying to increase your retirement savings and wouldn’t otherwise use your concessional contribution cap you might want to consider making a personal contribution and claiming a tax deduction for it.
Additional information on making personal super contributions is available from the Australian Tax Office here.
Increasing your Spouse’s Super
If your spouse has a significantly lower super balance than you it may be worth considering splitting superannuation contributions. If you and your spose are eligible for super splitting you can lodge a super splitting request. Splitting requests need to be made before June 30 of the year following the year in which the contributions are made. So this means you may be able to split contributions for the 2019/20 year up to June 30 2021.
Additional information on contribution splitting is available from the Australian Tax Office here.
In tax tip #1 we outlined the benefits of making a spouse contribution for a spouse that earned less than $40,000 in the 2019/20 year.
Using the First Home Super Saver Scheme
From the 1st July 2017 you have been able to make voluntary contributions into your super fund to help save for your first home. The idea behind the scheme is that the concessional tax treatment of superannuation could help first home buyers save more quickly.
From the 1st July 2018 eligible superannuation members will be able to have some of their super savings released to help fund the purchase of their first home.
What does it mean?
If you are saving for your first home you might want to consider saving inside super. From 1 July 2018 you can apply to the ATO to have up to $15,000 from any one year and $30,000 in total from eligible super contributions and earnings released using the First Home Super Saver Scheme release form.
Additional information on the First Home Super Saver Scheme is available from the Australian Tax Office here.
Contributing “downsizing” sale proceeds into super
If you are 65 years old, or older and sell a property on or after 1 July 2018 you may be able to contribute up to $300,000 from the proceeds of selling your main residence into your super fund. Your spouse may also be able to make a $300,000 contribution.
What does it mean?
If you have owned you main residence for 10 years or more and you are looking to downsize you might be able to make a downsizer superannuation contribution. If you are eligible to make a downsizer contribution you will need to complete the downsizer contribution form which should is available from the ATO or your fund.
Additional information on the Downsizing Contributions is available from the Australian Tax Office here.
This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) or the Australian Taxation Office.