Tax deductible super contributions

The concessional contribution cap for the 2020/21 financial year is $25,000 across all your superannuation accounts (if you have more than one superfund). If you contribute more than this, you may need to pay extra tax. Contributing into super might build your superfund balance and could provide you with a tax deduction.

Concessional contributions include employer super guarantee and salary sacrifice contributions. You can also make a personal contribution into superannuation, but you will need to claim a tax deduction by filling a “notice of intent to claim” form with your super fund. This will need to be received by your fund as a written acknowledgement before you lodge your tax return for the year otherwise it will not be classified as a concessional contribution.

Super contributions must be received before 30-June-2021

It is important that your contribution is received into your super account before 30 June, otherwise it will be counted towards the next financial year. Payment to a superannuation clearing house before 30 June may not be sufficient to guarantee tax deductibility as the clearing house needs to pay it to the fund. If you are considering contributing to super, be sure to submit them via BPAY or Direct Debit by Wednesday 23rd June. This will allow your contributions to reach your superannuation fund before the end of the financial year.

Catch-up concessional contributions

From 2018/2019, you can roll forward any unused concessional contributions for up to five years. That means if you have not contributed up to the $25,000 in 2018/19 or 2019/20, you can carry-forward the unused amount to future years, for up to five years later. This is on the basis that your total super balance is less than $500,000 on 30 June of the previous financial year.

Non-concessional contributions

Non-concessional contributions (NCCs) are super contributions made from after-taxed income or savings.

The NCCs cap depends on your total super balance on 30 June 2020, your age and certain other factors. If you have more than one super fund, all NCCs made into all your super account will be add up and counted towards the NCCs cap.

Details	Total super balance on 30 June as at 2020	Cap in 2020/21
Annual Cap	< $1.6 million	$100,000
Bring forward cap	< $1.4 million	$300,000
	$1.4 million to <$1.5 million	$200,000
	$1.5 million to <$1.6 million	$100,000
	$1.6 million +	Nil

 

The ATO will inform you if you have exceeded the NCCs cap. If you do, you can withdraw the excess NCCs and 85% of earnings as determined by the ATO. (Note: 100% of earnings on excess NCCs contribution are generally taxable at your marginal tax rate (less a 15% tax offset). If you don’t withdraw the excess NCCs, they will be taxed at the top marginal tax rate of 47% (including the Medicare levy).

Spouse contributions

You may want to consider making a spouse contribution if one spouse is a stay-at-home parent and earns a low income either working part time or out of work. This could be made as an after-tax contribution (so you have not claimed it as a tax deduction) and the receiving spouse is under the age of 70. If they are over this age, there are other requirements to meet such as a “work test”.

This type of contribution gives the low-earning spouse’s super account a boost while the higher-earning spouse may qualify for a tax offset of up to $540.

The full offset is available for those who contribute $3,000 if the receiving spouse’s income is $37,000 or less a year. A partial offset is available if the receiving spouse’s income is from $37,001 to $40,000 a year.

Government co-contributions

If you’re a low to middle-income earner and make an after-tax contribution to your super fund which you don’t claim a tax deduction for, you could be eligible for a government co-contribution of up to $500.

If your total income is equal to or less than $39,837 in the 2020/21 financial year and you make after-tax contributions of $1,000 to your super fund, you will receive the maximum co-contribution of $500.

If your total income is between $39,837 and $54,837 in the 2020/21 financial year, your maximum entitlement will taper down as your income rises.

If your income is equal to or greater than the higher income threshold $54,837 in the 2020/21 financial year, you will not receive any co-contribution.

Draw your minimum pension

If you already draw a superannuation pension, it is important that your fund has paid the minimum pension amount for the year, before 30 June 2021.

With any information, we have not considered your personal situation in this article nor taken into account your individual, financial situations and needs. Therefore, before proceeding you should speak to your tax professional &/or your financial adviser. If you wish to discuss how the above affects you or if you have any other questions, please do not hesitate to contact our office on 1300 620 345.