As we march ever closer to the end of the financial year, here are some issues to consider around Superannuation, which can be a minefield, both when trying to take full advantage of the tax breaks that are available, and in avoiding mistakes and pitfalls which will attract penalty charges.
1. Review contributions
Check the level of super contributions made this financial year, especially people who are salary-sacrificing. The concessional contribution limit is $25,000 for this financial year and contributions over this sum risk being taxed at the top marginal tax rate.
A number of people have been caught out by this in recent years, so it’s worthwhile spending fifteen minutes reviewing super before the end of the year and stopping any more contributions to make sure you aren’t one of them, and liable for thousands of dollars in tax.
2. Additional contributions
Those who have money outside of the super structure and who are nearing retirement but are still under age 65 could consider making non-concessional contributions.
Non-concessional contributions of up to $150,000 each or $450,000 (using the “bring-forward” provision) can significantly increase super balances.
Superannuation is still one of the most tax-effective ways to invest, even considering any proposed changes, so it’s worthwhile topping up super wherever possible.
Everyone should consider making the maximum tax-deductible superannuation contribution of $25,000 before 30 June 2013, either by salary-sacrificing if you are an employee, or by making a personal contribution if you are self-employed.
3. Transition-to-retirement strategies
If you have already reached age 60, or who are turning 60 prior to 30 June 2013, should consider starting a transition-to-retirement pension. This is a tax-free pension of up to 10 per cent of the super account balance each year.
This strategy is likely to be more popular next financial year when the proposed contribution limit for those over age 60 increases to $35,000 and a salary sacrifice together with a transition-to-retirement pension strategy will be available.
However, commencement of the transition-to-retirement pension prior to 30 June 2013 will provide an additional few months of tax-free earnings.
4. SMSF compliance
Anyone planning to transfer listed shares into their self-managed superannuation fund (SMSF) as part of a superannuation contribution should do so prior to 30 June 2013, as the government proposes to restrict the acquisition and disposal of assets between an SMSF and a related party after 1 July 2013, even when the transfer is at market value.
The shares would need to be sold on open market and then the cash contributed into the SMSF to enable the fund to purchase the same shares.