It’s time to prepare for 30 June

With the end of financial year fast approaching, now’s the time to make the most of opportunities to maximise super and tax benefits.

Superannuation Contributions

Concessional Contributions under age 75

The standard limit of $27,500 per annum of concessional (before tax) contributions apply. This includes the Superannuation Guarantee Contribution (usually 10% of your salary) you receive from your employer, voluntary salary sacrifice contributions and personal contributions for which you claim a tax deduction.

While no work test is required for SGC or salary sacrifice contributions, if you are age 67 to 74, you will need to meet (or be exempt from) the work test, requiring you to have worked 40 hours in 30 consecutive days during the financial year you make a personal deductible contribution and you must undertake the work prior to making the personal contribution. 

Catch-up contributions

If your total superannuation balance was less than $500,000 on 30 June 2021, you may also be eligible to make additional concessional contributions if you have contributed less than the concessional contribution limit allowed in any of the previous three financial years (from the 2018/19 financial year). You can claim a personal tax deduction in relation to these “catch up” contributions. The work test rules noted above apply for anyone aged 67 to 74. 

Government Co-Contribution under age 71

Take advantage of government incentives by contributing $1,000 of non-concessional (after tax) contributions into superannuation. To be eligible, you must be in paid employment and have total assessable income plus reportable fringe benefits plus salary sacrifice contributions less than $41,112 to receive the maximum co contribution of $500.

You will be entitled to a part co-contribution if your assessable income plus reportable fringe benefits plus salary sacrifice contributions is between $41,112 and $56,112 for 2021/2022 financial year. You must have had less than $1.7m total superannuation assets on 30 June 2021 and be under age 71 on the last day of the financial year the contribution is made.

Other Superannuation Contributions under age 75

In addition to the concessional contributions outlined above, you are also able to contribute $110,000 of non-concessional (after tax) contributions into superannuation, provided your total superannuation balance was less than $1.7 million on 30 June 2021.

If you are under age 67, you do not need to meet the work test requirements if you make the contribution before turning age 67. If you are aged between 67 and 74, you must meet the work test requirements to make personal contributions to super unless you meet the work text exemption criteria. 

Under age 67

If you are under age 67 and meet the total superannuation balance limits, you may also be eligible to “bring forward” future years’ contributions. If your total superannuation balance was less than $1.48 million on 30 June 2021, the rules allow you to bring forward two years’ worth of contributions into the current year. This means you can contribute $330,000 into superannuation at one time but nothing more in after tax contributions for the next 2 years without incurring excess contributions tax.

If your total superannuation balance was less than $1.59m on 30 June 2021, you may bring forward one year worth of contributions into the current year. This means you can contribute $220,000 into superannuation at one time but nothing more in after tax contributions for the next year without incurring excess contributions tax.

Retirement Income Streams and Transition to Retirement (TtR) Pensions

Minimum pension

The minimum annual pension payment is calculated as a percentage of the account balance at 1 July each year. The government halved the normal minimum pension income requirement in recent years in response to Covid-19’s impact on investment markets. The temporary 50% reduction in the minimum pension drawdown requirements has been extended to include the current financial year 2021/22 and next financial year 2022/23.

There is no maximum limit for Account based pensions. If you have a Transition to Retirement (TtR) pension, you must not draw more than 10% of the account balance in income during the financial year.

Other Tax Planning Considerations

Realised Capital Gains

If you have realised capital gains from the sale of a property, shares or other asset for this financial year, you might consider selling investments with unrealised capital losses to offset the future tax liability.

It’s important to be aware however that the Australian Taxation Office (ATO) will disallow any capital losses where an investor has engaged in what is known as a “wash sale”. This type of action takes place when an investor sells a specific stock only to re-buy the same or a similar amount of shares in that stock a short time later.

Although the ATO does not specify an exact time period, there is little leeway for this practice if the ATO believes a tax benefit has been derived from a transaction that otherwise would not have been executed but for the sole purpose of minimising tax.

Prepaying Tax Deductible interest

If you have investment or margin loans, it may be beneficial to prepay the interest on the loan. This then allows you to claim the tax deduction in this financial year. The maximum prepayment allowed is 12 months and the interest rate is then fixed for this period.

The information is general in nature and does not take into account your personal circumstances. Should you wish to consider any of the strategies outlined above, we recommend you speak with your financial adviser to ensure the strategy is beneficial to you.