It’s nearing the end of the financial year, and that’s the time we traditionally review superannuation contributions.
There are two types of contributions – concessional and non-concessional contributions, and today we’re discussing concessional contributions.
What are concessional contributions?
For those that need a refresher, concessional contributions refer to the types of contributions that have a tax deduction claimed against them. This commonly includes contributions that come from an employer via the 9.5% super guarantee, or salary sacrifice. These contributions are taxed at 15%.
The general concessional contribution limits are $25,000 per person, per financial year.
What should I think about when planning my concessional contributions for 30 June 2020?
- “Carry Forward” your previously unused concessional contributions
Although the general concessional contribution limit is $25,000, the 2020 financial year is the first year that we’ve had the opportunity to utilise the ‘Carry Forward’ provisions announced as part of the 2017 Budget.
What this means is, if your total superannuation balance is less than $500,000 at 1 July of the current financial year, you’re eligible to utilise any unused concessional contributions from 1 July 2018.
For example, if during the 30 June 2019 financial year your concessional contributions totalled $20,000, you have $5,000 unused. Assuming that your total superannuation balance at 1 July 2019 is less than $500,000, for the 2020 year you would actually be able to claim $30,000 in concessional contributions, being $25,000 for 2020, as well as the $5,000 not used up in 2019.
Although this was only available from 1 July 2018, going forward you’ll be able to ‘carry forward’ up to 5 years of unused concessional contributions. This is great for topping up in a later year if you are able to. So, in 2023 if you still have that $5,000 from 2019 unused, you can carry that forward and use it then.
Don’t forget to take into account the balances of all your superannuation accounts if you have more than one.
- Claiming a personal tax deduction for any super contributions made (and making up for COVID-19)
Previously only those who earned less than 10% of their income from salary or wages could directly claim a tax deduction in their personal tax return. Now anyone can make this claim.
This is particularly handy for a couple of reasons:
- Your employer doesn’t allow you salary sacrifice additional amounts to your super;
- You want to save the cash towards the end of the financial year, and then top up to exactly $25k yourself (that is, you have full control over the total contribution);
- Your contributions have not been as high as usual due to COVID-19 and a decline in your wages.
Making these contributions is fairly straightforward – you make a deposit directly to your superannuation fund, and submit a Notice of Intent to Claim a Deduction Form to the trustee so that they know that you’re claiming a tax deduction on the amount.
- Division 293 Tax
Division 293 tax is an additional tax on super contribution which applies to individuals who earn over a certain threshold. If your earnings are over $250,000 this applies to you for 30 June 2020.
The additional tax is charged at 15% which is just something to note if you are over the threshold – your contributions are going to be taxed at 30% instead of usual 15%.
If you would like additional information please do not hesitate to contact me or ask your question in the comment box below.
