Before June 30, you can split up to 85 per cent of your concessional contributions made in 2016-17 to your spouse's super.
With the end of the financial year fast approaching, it's time to get your "financial house" in order. Generally, it's this time of the year that you consider your superannuation position, specifically the contribution caps as it's important not to exceed them.
For 2017-18, the pre-tax, concessional contributions (CC) cap is $25,000.
But the after-tax, non-concessional contributions (NCC) cap has become overly complicated and this is where quality advice can be critical. For 2017-18, the NCC cap is $100,000, but you can only make an NCC if your total superannuation balance (TSB) – the total amount you have in the superannuation system – is less than $1.6 million at June 30, 2017.
If you're under 65 any time during the year, it's possible to trigger the 'bring-forward' rule. This is determined by your TSB. If it is less than $1.4 million at June 30, 2017, then the maximum NCC cap is $300,000 and the bring-forward period is three years.
If saving for your first home, consider making a contribution under the First Home Super Saver Scheme before June 30, 2018 as the earning amount withdrawn at a later date will be calculated from July 1, 2017.
If your TSB is between $1.4 million and $1.5 million, then it's $200,000 and two years. And if it's between $1.5 million and $1.6 million, then the maximum NCC cap is $100,000 with no bring-forward period.
However, if you triggered the bring-forward rule in the past two years and did not contribute $540,000 by June 30, 2017, then transitional rules may apply. The maximum NCC cap over the three-year bring-forward period is $460,000 if the bring-forward was triggered in 2015-16 and $380,000 if triggered in 2016-17.
Thus, if you wish to make an NCC, it's imperative to check both your TSB as at June 30, 2017 and contribution history from July 1, 2015.
The work test must be met if you are 65-74 and wish to contribute.
1. If you're a wage earner, it's important to ensure your employer's compulsory Superannuation Guarantee (SG) contributions and any voluntary employer contributions (including salary-sacrifice and now any personal deductible contributions) you make do not exceed the CC cap. Be aware of compulsory super contributions on bonus payments.
2. If your employer pays the super fund's administration expenses and/or insurance premiums for cover in the fund, these payments count towards the CC cap.
3. If you're claiming a tax deduction for a personal contribution, then the paperwork supporting your claim is critical and must be done before making a withdrawal, starting a pension or rolling over benefits to another super fund.
4. Consider the appropriateness of a "contribution reserving strategy" to maximise the tax deduction in 2017-18.
5. Before June 30, 2018, you can split up to 85 per cent of your concessional contributions made in 2016-17 to your spouse's super. You may wish to do this to even up entitlements to maximise the amount you can both get into the tax-free retirement phase given the TBC. Or it could be to move entitlements from a younger to older spouse for earlier access to benefits, or from a spouse at or over age pension age to a younger spouse to shelter from social security means-testing.
6. If your spouse's total income is less than $40,000, you may be eligible for a tax offset up to $540 when making a spouse contribution of up to $3,000. You're ineligible if your TSB is $1.6 million or more.
7. If your total income is less than $51,813, you may be eligible for a government co-contribution for a non-concessional contribution. Again, you're ineligible if your TSB is $1.6 million or more. The maximum co-contribution is $500.
8. If saving for your first home, consider making a contribution under the First Home Super Saver Scheme before June 30, 2018 as the earning amount withdrawn at a later date will be calculated from July 1, 2017. Thus, a greater amount may be withdrawn along with the contribution(s).
9. Remember, a contribution is taken to be made and counts towards your contribution cap in the year the super fund receives it. Allow time for funds to be transferred by June 30 if transferring electronically. This year June 30 falls on a Saturday.
By Colin Lewis
7 June 2018