By Paul Rickard

With the end of the financial year only 14 sleeps away (who is counting?), here are 7 essential actions to check off before 30 June in regards to your super. Whether it be by making additional contributions, checking whether you have paid yourself enough pension, getting the Government to cough up a co-contribution, or claiming that tax deduction for your fund – these actions will help you get the most out of the system.

1. Can you make additional contributions to super?

If you can, consider making additional concessional super contributions. Concessional contributions include your employer’s 9.5%, any amount you salary sacrifice, or if self- employed, the amount you claim as a tax deduction. 

With the Government foreshadowing changes from the start of the 2017 financial year, this is the second last year to access the higher caps. For the current financial year (2015/16), the caps are:

Non concessional contributions, which are personal super contributions made from your own monies, are capped at $180,000 pa. However, given the uncertainty around the Government’s plan to introduce a lifetime cap of $500,000 effective from Budget night (which will include all contributions made since 1 July 2007) this may not be the time to make additional non-concessional contributions.

For both concessional and non-concessional contributions, the normal age rules apply. Up to age 65, anyone can make a contribution. If you are between 65 and 74 years, then you must pass the work test, which is defined as working 40 hours over any period of 30 consecutive days. If you are 75 or over, only mandated employer contributions (the compulsory 9.5%) can be made.

For those working, then the easiest way to make an additional super contribution is probably going to be via salary sacrifice, so talk to your payroll office promptly.

2. Super contributions must be banked by 30 June – don’t leave it to the last minute

While there is some flexibility about the allocation of contributions to member accounts, they must be received and banked by the super fund by 30 June. This year, 30 June falls on a Thursday – so if making a contribution to your SMSF by cheque, or making it on behalf of a family member to an industry or retail fund by BPay, EFT, or cheque, allow sufficient time for the funds to be processed and cleared. Most funds say to allow at least two working days – so get your contributions made by Monday 27 June.

3. Can you access, or can a family member access the Government Co-Contribution?

There aren’t too many free handouts from Government. The government super co-contribution remains one of the few that is available – so it seems silly not to try access it. If eligible, the Government will contribute up to $500 if a personal super contribution of $1,000 is made.

The Government matches a personal contribution on a 50% basis. This means that for each dollar of personal contribution made, the Government makes a co-contribution of $0.50, up to an overall maximum contribution by the Government of $500.

To be eligible, there are 3 tests. The person’s taxable income has to be under $35,454 (it starts to phase out from this level, cutting out completely at $50,454), they must be under 71 at the end of the year, and critically, at least 10% of this income must be earned from an employment source.

While you may not qualify for the co-contribution, this can be a great way to boost a spouse’s super, or even an adult child. For example, if your kids are university students and doing some part time work, you could potentially make a personal contribution of $1,000 on their behalf – and the Government will chip in $500!

4. Can you claim a tax offset for super contributions on behalf of your spouse?

This tax offset (rebate) has been around for years. If you have a spouse who earns less than $10,800 and you make a spouse super contribution of $3,000, you can claim a personal tax offset of 18% of the contribution, up to a maximum of $540.

The tax offset phases out when your spouse earns $13,800 or more. Effectively, your maximum rebatable contribution of $3,000 is reduced on a dollar for dollar basis for each dollar of income that your spouse earns over $10,800. The offset is then 18% of the lesser of the actual contribution, or the reduced maximum rebatable contribution.

Your spouse’s income includes their assessable income, reportable fringe benefits and any (though unlikely) reportable employer super contributions. 

5. Pensions – have you paid enough?

If you are taking an account based pension, such as an allocated pension or transition to retirement pension, then you must take at least the minimum payment. If you don’t, then your fund will potentially be taxed at 15% on its investment earnings, rather than the special rate of 0% that applies to assets that are supporting the payment of a super pension.

The minimum payment is based on your age, and calculated on the balance of your super assets at the start of the financial year (1 July). The age based factors are shown below.

For example, if you were aged 66 on 1 July 2015 and had a balance of $500,000, your minimum payment is 5% of $500,000 or $25,000. You can take your pension at any time, or in any amount(s), but your aggregate drawdown must exceed the minimum amount and be taken by 30 June 2016.

If you commenced a pension mid-year, the minimum amount is pro-rated according to the number of days remaining until the end of the financial year, and calculated on your balance when you commenced the pension.

6. If you have a SMSF, do you know the tax deductions your fund could claim?

There are potentially a number of tax deductions your SMSF could claim. Of course, your fund does have to be in accumulation phase and paying tax. If your fund is in pension, then you aren’t paying any tax and so there is no assessable income to be offset. Where a fund has one member in pension and one member in accumulation, or a member has both an accumulation and a pension account, then you will pro-rata the deduction according to the respective balances of the accumulation account and the pension account. Your accountant or actuary will advise you of the percentage that can be claimed.

Some of the expenses that are deductible include:

  • the ATO Supervisory Levy;
  • insurance premiums for death and disability policies;
  • accounting and auditing fees;
  • costs of updating a trust deed to comply with the SIS Act;
  • investment adviser fees;
  • subscriptions to reports such as the Switzer Super Report;
  • administrative expenses such as bank fees, filing fees etc; and
  • if you have taken out a limited recourse borrowing arrangement to purchase an asset that produces assessable income, the interest cost.

7. Specific 30 June issues for SMSFs

There are 3 specific 30 June issues that SMSF trustees should be aware of. Firstly, it is a requirement that all assets are valued at market value, so if you have unlisted assets such as real estate or collectables, you may need to line up relevant assessors now to determine their market value. While external valuations are not required every year, you are required to determine the market value each year, so having some sort of basis will be relevant.

The end of this financial year also marks the end of the transition period to the new rules for collectables and personal use assets, covering aspects such as insurance, storage and use by related parties. Announced back in 2011, all collectables such as artwork, coins or antiques must fully comply from 1 July. And if your SMSF has borrowed money from a related party under a limited recourse borrowing arrangement, you may need to review the loan terms to ensure that these are on a “commercial” basis. Your accountant or adviser should be able to help you with these matters.