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.
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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
| Description | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 |
|---|---|---|---|---|---|
| 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 |
| Concessional contributions | nil | $3,000 | $3,000 | nil | nil |
| 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.
In this article we go through some general reminders that SMSF trustees and members need to be aware of, and perhaps take action on before 30 June 2019.
We look at your contributions for the year, what a total superannuation balance (TSB) means, whether you can contribute to your superannuation account, what a work test is and how it affects you… and things to consider if you are turning 75.
Check your contributions
With only 6 weeks left of the 2019 financial year, it’s a good idea to review where your concessional contributions are up to.
The concessional cap for individuals for the 2019 financial year is $25,000. This cap applies per person so if you have more than one superannuation fund you should check all of them.
Concessional contributions are contributions that are considered ‘taxable’. Most commonly known as employer contributions, salary sacrificed contributions and contributions where you intend to claim a personal tax deduction.
If you have a salary sacrifice arrangement in place with your employer you should add up your total concessional contributions already paid to your superannuation fund from 1 July 2018 to present, to ensure you will not exceed your cap.
Amounts contributed over your annual cap are considered excess contributions and eventually will be taxed at your marginal tax rate plus interest.
Your Total Superannuation Balance (TSB)
Total Super Balance refers to the total amount an individual has in superannuation as at 30 June of the prior financial year ie currently for 30 June 2018.
The TSB is used to determine how often you need to report certain events to the ATO such as pension commencements and lump sums and most importantly whether you can make non concessional contributions (non-taxable contributions).
If you have a TSB of over $1.4m as at 30 June 2018 the amount you contribute to superannuation as non concessional contributions may be restricted. You will have noticed we have been requesting the 30 June balances of any other superannuation funds you have outside of your SMSF. This is due to the TSB applying not only to your SMSF balances, but all your superannuation balances. It is important you consider any other super funds you have before making non concessional contributions.
Am I allowed to contribute to superannuation ?
Apart from having to consider your TSB before contributing to superannuation you also need to consider your age. For individuals aged 65 and over at the time of contributing, you must meet a work test prior to making voluntary concessional or non concessional contributions.
So, what is this work test ?
Basically if you are aged 65-74 you must be working for a minimum of 40 hours in any 30 consecutive day period. By working, the ATO mean you must be gainfully employed where you receive remuneration for your efforts. ie not volunteering. Where you are employed and are paid per hours worked, the work test is usually quite easy to prove. For those that are self employed with varying hours of work, this can become more difficult to show you have done the necessary hours. We suggest keeping a timesheet or work diary to show the work test has been met.
If you are unsure whether you can meet the work test, check with us first! As a trustee you should not be accepting contributions from members 65 and over (even yourself!) if the work test has not been met.
Are you approaching 75 years of age?
If you are approaching 75 years of age you might be planning how to celebrate this occasion. And as much as we love a party, we’d hate for you to miss out on making your last contributions to superannuation.
For individuals turning 75 years old (that can meet the work test), contributions must be received no later than 28 days after the end of the month that individual turns 75 years old.
This may be the last opportunity to contribute to your superannuation fund. If you would like further information please contact us.
Think your good old spreadsheet or notepad is good enough to keep track of employees’ wages? Think again!
On 12 February 2019, the Parliament has passed the laws requiring all businesses use single touch payroll from 1 July 2019.
This means that from 1 July 2019 onwards, all businesses that employ staff, whether it is 1 or 100, are required to register for single touch payroll to keep track of their employee wages, PAYG Withholding and superannuation obligations.
