Superannuation contributions 2020/2021

Superannuation remains a tax advantaged long term investment which will benefit from compounding over the years for retirement.

Concessional/deductible contributions by employers for employees

Maximum contributions for each employee up to 75 years of age, including “salary sacrifice” (needs to be proactive) and superannuation guarantee payments without incurring excess concessional contributions tax: $25,000 (increasing to $27,500 from 1 July 2021).

Conditions:

• Between 67–74 years must satisfy the work test and only contributions received before the 28th day after the end of the month in which member turns 75 are deductible.

• Contributions need to be received by the fund by the 28th of the month following quarter end.

Concessional/deductible personal contributions by individual taxpayers, including investors

Maximum contribution by each individual up to 75 years of age without incurring excess concessional contributions tax: $25,000 (increasing to $27,500 from 1 July 2021).

Conditions:

• The individual must notify the fund of intention to claim a deduction (form NAT 71121) and the fund must acknowledge the notice.

• Contribution cannot create or increase a loss (deduction cannot exceed taxable income).

• Over 67 years must satisfy work test.

• For individuals turning 75, only contributions received before the 28^th day after the end of the month in which member turns 75 are deductible.

High income earner contributions (Division 293)

From 1 July 2017, an additional 15% “contributions tax” is applied to those with adjusted taxable incomes (broad definition) exceeding $250,000.

Non-concessional/non-deductible contributions by individual taxpayers

Maximum contribution by each individual up to 75 years of age without incurring excess non-concessional contributions tax: $100,000 subject to individual’s total superannuation balance, (increasing to $110,000 from 1 July 2021).

Note:   Over 67 years the work test will need to be satisfied (from 1 July 2022 a work test is not required).

Note:   An individual taxpayer who is under 67 years of age in an income year can bring forward two years’ entitlements and make one contribution of $300,000, subject to the individual’s total superannuation balance, without exceeding the cap (increasing to $330,000 from 1 July 2021) ─ i.e. no further contributions over the three years.

Note:    The annual maximum amount will be indexed and remain at six times the concessional amount.

Note:   If an individual’s total superannuation balance at 30 June 2017 was $1.6 million or higher, the non-concessional cap will be nil.

 Excess concessional/deductible and non-concessional/non-deductible contributions

From 1 July 2013 excess concessional (only) contributions will be taxed at the member’s marginal tax rate with tax offset and an interest charge applied. The excess may be withdrawn from the fund.

The punitive tax rate of 47% remains for excess non-concessional contributions.

Government co-contributions

The co-contribution made by the Government of up to $500 is available to employees and the self-employed less than 71 years of age at the end of the income year who make non-concessional/undeducted personal superannuation contributions of up to $1,000 and whose total income (assessable, reportable employer superannuation contributions and reportable fringe benefit amounts) is less than $54,817; the lower threshold of $39,837 allows for the full co-contribution 50c/$1.

Conditions:

• 10% or more of the person’s total income is attributable to employment or carrying on of a business.
• Total superannuation balance at 30 June 2017 must be less than $1.6 million.

Government contributions for low income earners

From 1 July 2017, concessional contributions made by or on behalf of individuals with adjusted taxable incomes of up to $37,000 will be matched by the Government up to an annual maximum amount payable of $500.

Contributions for spouse – tax offset

A taxpayer making a personal non-concessional/non-deductible contribution for his/her non working or low income spouse is eligible for a tax offset of up to $540 where a contribution of up to $3,000 is made for a spouse whose assessable income, reportable fringe benefit and reportable superannuation contribution amounts do not exceed $37,000. The offset is phased out at $40,000.

Conditions:

• No work test is applied if the spouse is under age 65, but between 65 and 70 years the spouse must satisfy the work test. No offset over 70 years of age.

Fund acceptance of contributions – age and work test

A regulated superannuation fund may accept contributions as follows:

• If the member is under age 67

– all contributions made

• If the member is 67 or more but under 70 years

– mandated employer contributions

– employer or member contributions provided the work test is satisfied

• If the member is 70 or more but under 75 years

– mandated employer contributions

– employer or member contributions up to the 28th of the month in which the member turns 75 and the member satisfies the work test

• If the member is 75 years or more

– mandated employer contributions

A person satisfies the work test if gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year.

Superannuation guarantee contribution rate

From 1 July 2014, the contribution rate increased from 9.25% to 9.5% and will remain so until 1 July 2021 when it will increase by 0.5% each year until the rate is 12%. The 2021/2022 SGC rate is now 10%.

The minimum monthly wage of $450 to qualify for super guarantee contributions will be scrapped on 1 July 2022.

Reportable employer super contributions

From 1 July 2014, the payment of salary sacrifice superannuation and other additional* superannuation over and above the compulsory superannuation guarantee charge of 9.5%, paid by employers for employees, will need to be recorded on employees’ year end PAYG summaries.

*where employee influences the rate or amount of employer contributions.

An employee is considered to have the capacity to influence if he or she can directly negotiate the rate or amount of employer contributions.

As a guideline, the capacity to influence may be shown by:

1. The employer’s relationship with the employee. For example, the employee is the spouse of the employer.
2. The employee’s involvement in negotiations/preparation concerning the terms of any industrial agreement governing super contributions.
3. The amount contributed for the employee relative to the compulsory contributions the employer is required to make.
4. The employer’s super contribution arrangements for other employees.
5. Any non-arm’s length dealings.

Unused concessional/deductible contributions (both for employers and individual taxpayers, including investors)

From 1 July 2018, where an individual’s superannuation fund balance is less than $500,000 (as at previous 30 June), unused concessional contributions (up to the maximum $25,000 each year) may be aggregated and claimed on a rolling five year basis. The unused contributions are available for a maximum of five years, expiring after five years. The unused contributions can be accessed from 1 July 2019 and contributed in addition to the $25,000 cap already allowed.

Notice of intention to claim “catch up” needs to be provided to the fund and, if over 65 years, the work test needs to be satisfied.

Home proceeds (known as “downsizing”, one-off contribution, not subject to usual cap)

From 1 July 2018 proceeds from sale of home may be contributed, subject to:

• Individuals aged 65 years or more

• Proceeds from sale of primary dwelling / main residence

• Lived therein and owned for at least 10 years

• Provided house sells for at least $600,000, each joint owner may contribute up to $300,00

• Contribution must be made within 90 days of settlement

• Contract must be signed on or after 1 July 2018

• Usual age and work tests not applicable

For all things superannuation CONTACT US now at BSN & Co!

The super guarantee rate is going up!

The standard rate of 9.5%, which has been in place since 1 July 2014, is finally increasing to 10% starting 1 July 2021, hence for the 2021/2022 financial year employers’ super guarantee contributions will need to be calculated at the new 10% rate.  Each financial year thereafter, there will be an increase of .5% until the super guarantee rate will be 12% for the 2025/2026 financial year!

As a caution, and a reminder for employers, mandatory payment dates are the 28^th of the month following each quarter’s end:-

Q1       28 October

Q2       28 January

Q3       28 April

Q4       28 July

With single touch payroll itself mandatory for all employers, we expect many would be making superannuation payments in line with STP pay runs for convenience, however if you continue to make quarterly payments of the super guarantee, please ensure the actual payment is made well before the due date.  Payments not made on or before the mandatory dates are not tax deductible.

The Australian Taxation Office has recently made employers liable for late payments, even when paid to an online commercial clearing house portal on or before the due date!  It is imperative super guarantee payments are received by the fund on or before the due date – some clearing houses other than the ATO can take up to 10 days to process!

For more information about super guarantee or STP reporting CONTACT US now at BSN & Co!

Donations and gifts made by businesses

Donations and gifts made by businesses to various organisations that are made purely for business purposes, e.g. as a form of advertising, may be deducted in full even though the recipient is not registered as a Deductible Gift Recipient (DGR) with the Australian Taxation Office.

Donations and gifts of $2 or more

(a)          Within approved general categories such as the following, for example:

–           public or non profit hospitals

–           public benevolent institutions

–           public authorities or institutions engaged in research into diseases

–           buildings for government, semi government, private non profit colleges or schools

–           public universities

–           charitable purposes to promote education.

(b)          Those organisations registered with and listed by the ATO on its website as Deductible Gift Recipients (DGRs).

It is essential you have evidence of  donations and gifts, e.g. receipt.  Please note purchase of raffle tickets or similar is not considered a donation by the ATO even though the raffle may be conducted by a charitable organisation.

For more information about donations or other tax deductible expenses  CONTACT US now at BSN & Co!

Temporary full expensing replaces the $150,000 instant asset write off

Temporary full expensing replaces the $150,000 instant asset write off for businesses acquiring new assets.  Apart from subsidies for hiring additional younger staff (16 to 35 years) under the Jobmaker plan, the $150,000 instant asset write off has been replaced with a more generous temporary full expensing incentive for businesses acquiring assets!

Ordinarily, assets acquired for use in your business are depreciated over a period of years so that, in the main, a full tax deduction for the capital purchase is progressively obtained. Various incentives have been provided in recent years to encourage business expenditure as a boost to the economy and the “temporary full expensing” tax deduction, available for businesses until 30 June 2022, has been extended for a further 12 months in the 2021 federal budget, to 30 June 2023!

Where businesses acquire eligible depreciating assets such as plant and equipment, the business may claim an immediate outright tax deduction for the business use proportion of the expense!  In the case of non-commercial passenger motor vehicles, however, “temporary full expensing” will be limited to the luxury car limit for depreciation, being $59,136 for the current 2020/2021 year.

If you want to know more about temporary full expensing or anything else from Budget 2021 then CONTACT US now at BSN & Co!

The transfer balance cap is increasing to $1.7 million!

The superannuation transfer balance cap was introduced in 2016 and took effect from 1 July 2017.  Apart from changes to concessional and non-concessional contribution amounts, the legislation limited the lifetime amount which could be transferred from accumulation mode to pension mode to $1.6m.  However, indexation is increasing this to $1.7m on 1 July 2021.

The legislation also precluded further non-concessional contributions where your superannuation balance exceeded $1.6m.

While you are unable to transfer more than the prescribed transfer balance cap amount into pension mode, the pension account may continue to grow and exceed $1.6m.

Any monies you are unable to transfer into pension mode may remain in the accumulation mode within the fund.

Essentially, there would be two accounts within the fund, one being the tax free pension account and the other the accumulation account, subject to the 15% income tax ordinarily applied in the superannuation environment!

If you have any queries or need advice then CONTACT US now at BSN & Co!