Now is the time to review your superannuation arrangements including salary sacrificing, personal deductible contributions, spouse contributions and future catch-up contributions.
The annual concessional (before tax) contribution cap has reduced to $25,000, from the previous $30,000 or $35,000 (depending on age). This includes all types of concessional contributions such as employer contributions, salary sacrifice and personal deductible contributions.
For those who have a salary sacrifice arrangement in place, you may want to review your contribution strategies and any arrangements made with employers to ensure the total concessional contributions do not exceed the reduced cap in 2017/18.
This review is best done as soon as possible in the financial year, to ensure you do not accidentally exceed the new limit.
Personal Deductible Contributions
Prior to 1 July 2017, people were not able to claim a tax deduction on their personal super contributions if they earn 10% or more of their total assessable income as an employee. This is called “10% test”. However from 1 July 2017 forward, the “10% test” has been removed and now you are able to make personal deductible super contributions regardless of your employment status.
This change provides you with an additional option of making personal deductible super contributions – you can continue with your current salary sacrifice arrangement, or you can simply make personal contributions during the year and claim a tax deduction following the end of financial year.
Everyone loves a tax deduction, so we believe this will be a very popular option, and is a welcome change.
A spouse contribution tax offset is now available where the receiving spouse earns up to $40,000 per annum (previously $13,800 per annum).
The higher income limit is a sensible change and will result in a much greater number of eligible part-time and lower paid spouses.
Future Catch-up Contributions
The new catch-up contribution regime enables you to start to accrue unused concessional (the deductible) contributions from 1 July 2018 although the first year a client can make catch-up concessional contributions will be during the 2019/20 financial year. You will be eligible to make a catch-up concessional contribution if your total super balance is less than $500,000 on the prior 30 June.
While not immediately available, it will be particularly beneficial for small businesses, where income can tend to be very lumpy from year to year, meaning it can be difficult to make contributions during tough trading conditions.