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Super challenges at tax time

  • Friday, April 13, 2018
  • Sandy Dunshea

Many Australians may be overlooking opportunities to improve their super savings or facing penalties by leaving their super planning until the last minute.

Whether you have an SMSF or funds in an industry or retail fund, it’s important to get organised with your super NOW to avoid super problems at tax time or to capitalise on opportunities to make the most of your super savings.

Changes to superannuation legislation introduced on 1 July 2017 may mean you need to take significant action before the end of the financial year.  

It’s important to account for the time it may take to implement strategies associated with your super. Waiting until it’s too late could mean penalties or a reduction in your savings potential for retirement.

What you need to do
If you have an SMSF. . .
The introduction of the $1.6 million transfer balance cap in July 2017 means that many SMSFs need to re-distribute assets and restructure retirement accounts to enable SMSF trustees to reduce balances below the cap. If you have an SMSF you must make sure the total value of your retirement phase account is below $1.6 million before 30 June 2018. It’s important to account for the time that may be required for asset sales, restructuring of accounts and completing additional reporting and administration requirements.

Your SMSF may be eligible for Capital Gains Tax Relief associated with the movement of assets from the pension phase back to the accumulation phase; however there may be tax complexities and implications for other strategies such as estate planning, so it’s important to seek professional advice.

If you are a small business. . .
For small business owners with unpredictable incomes, there is an opportunity to boost your super by taking advantage of the catch-up concessional contributions provision, which will come into effect on 1 July 2018. This will allow individuals with a super balance of less than $500,000 to contribute ‘unused’ concessional contributions, within the $25,000 annual cap, to be carried forward for up to five consecutive years.

You must also pay Superannuation Guarantee contributions of 9.5% to any paid employees. These funds must be processed before June 30 to be tax deductible, and you will also need to account for super fund cut off dates and time restrictions of clearing houses.

If you have a significant super balance. . .
The maximum amount you are able to hold in pension phase is $1.6 million. If you are close to this balance or have excess funds in pension phase, you must reduce this amount. There are a number of options to do this including:
•    opting for a lump sum benefit to remove excess funds from super;
•    using a lump sum benefit and contributing funds to your spouse via non-concessional spouse super contributions; or
•    transferring excess funds to accumulation phase.

It’s important to consider how long it may take to implement these strategies as well as any time required by superannuation clearing houses.

If you want to boost your balance. . .
If you are close to retirement or wish to boost your balance by contributing large sums of money into your super, you need to consider that the after-tax contributions cap was reduced from $180,000 per annum to $100,000 per annum on 1 July 2017. If you are under 65, the bring-forward rule means you are able to bring forward three years of non-concessional contributions and contribute up to $300,000 in one financial year.

If you have salary sacrifice arrangements in place. . .
If you have salary sacrifice arrangements in place, to avoid penalties you will need to review your arrangements to make sure you do not exceed the cap for pre-tax or concessional contributions of $25,000 per annum. This $25,000 amount includes any employer Super Guarantee contributions as well as any additional contributions made through salary sacrifice arrangements.

If you would like advice on how to make the most of super strategies available to you, it’s important to act now. For further information on what you need to do to avoid super challenges at tax time, please contact Sandy Dunshea on (02) 6884 2222 or email admin@fortnumdubbo.com.au

Sandy Dunshea is a financial adviser with Fortnum Dubbo. Fortnum Dubbo and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.

The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Fortnum Dubbo strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances.  

This publication cannot be reproduced in any form without the express written consent of the author. 

Fortnum Dubbo and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.

The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances. This website holds information for Australian Residents only.

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