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The definitive guide to year-end super contributions
Colin LewisContributor
May 26, 2020 – 4.26pm
Leading up to the end of the financial year on June 30, many people want to know how much they can contribute to their superannuation to reduce tax and/or bolster their retirement nest egg.
It should be simple. But it's
more complicated than it first appears given there are several ways to contribute to superannuation and all have differing eligibility criteria.
Concessional (pre-tax) contributions
Making a concessional contribution (CC) – a personal contribution for which you claim a tax deduction and/or salary sacrifice contribution – is relatively straightforward.
You need to be mindful that the total amount that can be contributed by you and/or your employer is generally $25,000 before additional tax applies.
The amount you have in the super system – your total superannuation balance (TSB) – has nothing to do with this type of contribution.
If you choose to make a personal deductible contribution you must provide your super fund with a notice of intent (NOI) to claim a tax deduction for the contribution and have it acknowledged by the fund trustee – usually done about tax time.
Be very careful not to touch the contribution, e.g. roll it over to another fund, withdraw it, or start an income stream, before first lodging your NOI.
If you didn’t utilise the full $25,000 cap in financial year 2019, then the unused amount may be contributed this financial year provided your TSB on June 30 was less than $500,000.
Say your CCs in financial 2019 were $20,000 then you carried forward $5000. This financial year, you or your employer can make CCs up to $30,000 provided your TSB on June 30 was less than $500,000.
Alternatively, you can carry the $5000 forward up until financial year 2024 provided in the year you wish to apply it, your TSB is less than $500,000 at the previous June 30.
Non-concessional (after-tax) contributions
Making a non-concessional contribution (NCC) is more complicated. If you are trying to work out the maximum you can contribute before June 30 then you need to follow three steps – ideally, you should seek professional advice so as not to get it wrong.
The first step is you need to know the total amount you had in the superannuation system – your TSB – on June 30, 2019, as this dictates your eligibility to make an NCC.
If it was $1.6 million or more then you cannot contribute on a non-concessional basis. It’s worth noting that certain after-tax contributions –
downsizer contributions and CGT cap contributions – are not treated as NCCs and can be made regardless of your TSB.
You may be eligible to make a downsizer contribution of up to $300,000 if you sell a home that you or your spouse owned for a continuous period of at least 10 years and you are aged 65 or more. A CGT cap contribution of up to $1.515 million arises from the proceeds of sale of your business or other active business assets.
The second step is that you need to determine if you previously triggered the bring-forward rule.
If your TSB was less than $1.6 million at June 30, 2019, have a look at the NCCs you made in the 2017-18 and 2018-19 financial years as you need to know whether you triggered the bring-forward arrangements back then. You would have triggered the bring-forward provisions if you contributed more than $100,000 in either of those financial years.
Ensure you count any excess CCs not withdrawn from your super fund as NCCs. Say you made CCs of $27,000 in 2017-18 and after receiving an excess concessional contributions determination from the ATO did not elect to withdraw 85 per cent of the excess, i.e. $1700 (85 per cent of $2000), then $2000 would have counted towards your NCCs cap.
So, if you’d made an after-tax contribution of $100,000, then the total amount counted under the NCCs cap would have been $102,000, triggering – maybe unknowingly – the bring-forward arrangements.
Also, be careful if you find you contributed more than $100,000 back then that it was not the tail end of a previous bring-forward period. If you discover that you triggered the bring-forward rule in 2017-18 or 2018-19, then you need to know the bring-forward arrangement under which you contributed – was it $300,000 over three years or $200,000 over two years?
The former applies if your TSB
was less than $1.4 million at June 30 just prior to the year you triggered the bring-forward rule, So, the maximum you can contribute this financial year is any remaining balance to $300,000.
The latter applies if you had $1.4 million to less than $1.5 million and the maximum you can contribute now is any remaining balance to $200,000.
Step three is to check that it didn’t trigger the bring-forward arrangements in either 2017-18 or 2018-19, and the total amount you had in super – your TSB – was less than $1.4 million at June 30, 2019.
If it was, then you can contribute up to $300,000. If you had $1.4 million to less than $1.5 million then you can contribute up to $200,000, otherwise the maximum you can put in is only $100,000.
Aged 65 or over
Generally, if you are aged 65 to 74 you must have met the "work test" – 40 hours of gainful employment in 30 consecutive days – before you can contribute concessional, non-concessional and CGT cap contributions.
If you will not meet the work test in 2019-20 and wish to make a voluntary super contribution under the new work test exemption, you must have satisfied the work test in 2018-19 and had a TSB at June 30, 2019, of less than $300,000.
If you’re aged 74, then you only have up until 28 days after the end of the month in which you turn 75 for the trustee to receive your contribution.
Note that the work test and age restriction don’t apply to downsizer contributions.
So, if you’ve met the work test or work test exemption and wish to make an NCC before June 30, then steps one and two from the NCC section above still apply.
However, step three differs in that, if you haven’t triggered the bring-forward rule in either 2017-18 or 2018-19 and you were aged 65 to 74 at July 1, 2019, then the maximum you can contribute is $100,000.
Colin Lewis is head of strategic advice at Fitzpatricks Private Wealth.
