A few changes to the superannuation world that applies from 1 July 2021 onwards, including contribution cap changes, information for employers, individuals aged 60 or over, and changes to work tests.
This morning, the Australian Government has announced their second round of policies to further support Australian businesses and individuals as it is expected the Coronavirus will be impacting the economy in the next few months.
This is what we know so far:
If you are aged 65 and above and under 74, you will generally need to meet the work test prior to contributing to superannuation. The work test is basically gainful employment of 40 hours in a consecutive 30 day period. The work test must be met during the financial year and prior to making the contribution.
This often proved unfair where you have retired at the end of the financial year and received termination payments which fell in the next financial year. While there was now cash available to contribute to super, you may not have met the work test due to your retirement the previous financial year.
But here’s the good news – since 1 July 2020 you can access an exemption to the work test.
To be eligible:
- you must be 65 years and over but under 75 years of age
- you met the work test in the previous financial year
- your total super balance (TSB) is less than $300,000 on the 30th of June of the previous financial year
The exemption will apply only once per individual and will be available for the financial year following when the work test was met.
Usual contribution rules and cap limits will still apply to making contributions.
If you are over 65 and interested in making additional contributions to superannuation, talk to us!
Please note due to covid19 this measure has been pushed back and currently may not apply
Are you a business owner who is considering selling your business, but is unsure what the tax implications are?
When it comes to selling your business, there are many decisions to make, and sometimes these decisions may impact your tax liabilities on sale. It is therefore wise to speak to an expert about the road ahead before starting the journey of selling.
If a business is sold without having extensive analysis of its tax implications, you may end up having to pay up to 47% tax on the profit. However with proper consultation well before the sale, you may be able to reduce the income tax liability down (sometimes to nil!). The difference can be enormous when the profit is huge.
For example: a business sale with profit of $3m, with 47% tax, your share to keep is $1.59m, however with a 0% tax, you get to keep $3m. That’s a difference of $1.41m!
Below are some concessions you may be able to use to minimise your tax.
2019/20 is the first financial year that you can take advantage of the new carried forward concessional contributions measure that commenced on the 1 July 2018.
To be eligible, your total super balance must be less than $500,000 at 30 June 2019. If it is, then you may be able to make additional concessional contributions in the 2019/20 financial year.
What does this mean?
Essentially any unused contribution cap from the 2018/19 year can be carried forward to the current year. As an example if a member only made a concessional contribution of $10,000 in the 2019 year, they can bring forward the remaining amount of the cap $15,000 ($25,000-$10,000) and add it to their 2019/20 cap. This would mean that the concessional contribution cap for the 2019/20 increases to $40,000 ($25,000+$$15,000) for that member.
This option would be something to consider if you’re expecting a higher taxable income in the 2019/20 year as personal concessional contributions are tax deductible. Going forward it would be possible to carry forward unused cap limits for 5 years (starting with the 2018/19 year).
Below is a table the ATO have provided to illustrate how the unused cap works:
Table 2: Unused concessional cap carry forward
|General contributions cap||$25,000||$25,000||$25,000||$25,000||$25,000|
|Total unused available cap accrued||Not applicable||$0||$22,000||$44,000||$69,000|
|Maximum cap available||$25,000||$25,000||$47,000||$25,000||$94,000|
|Superannuation balance 30 June prior year||Not applicable||$480,000||$490,000||$505,000||$490,000|
|Unused concessional cap amount accrued in the relevant financial year||$0||$22,000||$22,000||$25,000||$25,000|
It can get confusing which is why you should seek professional advice before making contributions in excess of the annual cap. Getting it wrong can cause excess concessional contribution issues.
If you would like more information on carried forward concessional contributions caps, please contact us.
Aston Accountants can provide you with SMSF Advice with regards to making contributions to super. If you would like us to assess your personal situation and whether you can utilise the carry forward concessional contributions, please speak to us.