Superannuation planning is just as important as tax planning at the end of the financial year. As such, it is an area that needs to be carefully reviewed and checked to ensure that legal requirements, regulations and deadlines are being met to avoid breaches from occurring.
MAKING SUPER CONTRIBUTIONS
One of the areas that individuals need to review each year involves superannuation contributions.
Specifically, if contributions are to be deemed concessional or non-concessional if they are at risk of exceeding contributions caps or if it is possible to bring forward contributions into the current financial year.
Superannuation contributions need to be made prior to the 20th of June, as clearing houses can take up to 7 days to process the contribution.
You may also want to decide whether you will make a contribution to your spouse’s super, splitting concessional contributions with them or make a super contribution to save for your first home.
Are They Concessional (Tax-Deductible) Contributions?
Concessional contributions are before-tax contributions made into a super fund.
They include employer contributions, salary sacrifice payments and personal contributions that can be claimed as a tax deduction. For the 2022-23 financial year, the concessional contributions cap is $27,500.
You may be eligible to carry forward unused contributions contribute more than the general concessional contributions cap, and make additional concessional contributions for any unused amounts.
Accounting firms and financial planners can help you determine how much money you can contribute to super this year and still be entitled to a tax deduction.
Concessional contributions are taxed at 15%. Individuals may also pay Division 293 tax, which is an additional tax on concessional contributions for individuals whose combined income and contributions are greater than $250,000.
Are They Non-Concessional Contributions?
Non-concessional contributions are paid into super funds from after-tax income. They include contributions made by individuals or their spouses to a super fund where contributions are not claimed as an income tax deduction.
The annual non-concessional contribution cap for the2022-2023 financial year is $110,000.
Eligible individuals may make bring-forward contributions, allowing them to bring the next two years of their annual non-concessional contributions cap forward into the current financial year without breaching the contributions cap. Non-concessional contributions are not taxed unless the caps are exceeded.
DEPOSITING CONTRIBUTIONS INTO AN SMSF
Any contributions that have been recorded for your SMSF need to be deposited into the fund’s bank account by no later than 30 June. This is especially important when members have reported concessional or non-concessional contributions on their tax returns.
If you plan to set up an SMSF before the financial yearend, it may be better to defer the set-up until the start of the new financial year (1 July). This is because SMSFs incur fixed annual compliance costs that will apply regardless of whether it has been in action for a week or in action for a year.
REVIEW YOUR SALARY SACRIFICE AGREEMENT
Review your salary sacrifice agreement to ensure that you have maximised your salary sacrifice superannuation contributions for the 2022-23 financial year. If you do not have an agreement in place, then consider establishing an agreement with your employer for the 2023-24 financial year. From 1 July 2023, your salary sacrifice agreement must consider that the super guarantee rate will increase from 10.5% to 11%.
NOTICE OF INTENT TO CLAIM
In order to claim any superannuation contributions that you have made yourself to your super fund (outside of super guarantee or salary-sacrificed contributions) or to an SMSF, you must lodge a Notice of intent to claim a tax deduction to your super fund/SMSF. There are no early lodgements if you claim your contributions as a tax deduction.
DON’T FORGET TO SIGN YOUR FAMILY TRUST DECLARATIONS
Family trusts must decide who receives the trust’s income and capital before 30 June 2023. As family trust declarations can be digitally signed, it is important that they remain compliant with requirements (that the signatures are taken with all trustees present, that they are dated with the correct date, etc). Make sure that your accountant is aware of how your family trust will proceed with their distributions for the new financial year.
NEW TBAR FRAMEWORK TO BE INTRODUCED FOR SMSFS
A new transfer balance account reporting will be in operation for SMSFs from 1 July 2023 to create a more streamlined approach. SMSFs will be required to report on a quarterly basis.
Prior to 1 July 2023, SMSFs are required to report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs, or if the total balance of all SMSF members is less than $1 million, the SMSF can report this information at the same time that its SMSF annual return (SAR) is due.
The obligation to report earlier will remain for:
- A commutation of an income stream in response to an excess transfer balance determination (10 business days after the end of the month in which the commutation occurred)
- A response to a commutation authority must be reported by the legislated due date, as specified on the notice.
NOTE:
SMSF trustees may choose to report transfer balance account events more frequently than the quarterly-based timeframe. It is hoped that this change will allow you to better manage the transfer balance cap and avoid excess transfer balance tax on your SMSF
Need help with a SMSF or Wealth Management and your super? Contact the team at LT.