July 1st Marks TWO New Superannuation Possibilities

Wednesday, August 07, 2019
July 1st Marks TWO New Superannuation Possibilities

Written by Hudson Adviser Kris Wrenn 

As the new financial year began, two new possibilities opened up with respect to getting additional contributions into Super.

Catch up concessional contributions.

Technically this started last financial year, in the sense that the rules are done respectively and you need to know what concessional (pre-tax) contributions went into Super the financial year before. If you did NOT maximise the $25,000 limit for 2018/19, then whatever amount remained to you can be added to THIS financial years cap. If they go unutilised again you can actually carry them forward for 5 years before they “expire”.

Note they can only be used by those with a Super balance less than $500,000.

Below is the table used as way of example on the ATO website:

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

N/A

$0

$22,000*

$44,000

$69,000

Maximum cap available

$25,000

$25,000

$47,000

$25,000**

$94,000***

Super balance 30 June prior year

N/A

$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

Note * $22,000 has been accrued because only $3,000 was used in FY 18/19

Note ** Maximum cap available drops to only $25,000 because the Super balance has drifted over $500,000

Note *** Maximum cap jumps back up to $94,000 because the balance has drifted below $500,000 again and so the $69,000 unused from previous years becomes available again.

Potential strategy. Looking to sell an investment property carrying significant capital gains? A possible consideration is to think about accruing the above concessional contributions in order to utilise them all in the one financial year; the year you sell the property. Theoretically if you have made gains such that you will pay tax at the highest marginal tax rate, then a $125,000 deductible Super contribution could save you $42,500. i.e. (49% - 15% multiplied by $100,000).

The Work Test Exemption

The SECOND change to Super is available to a select minority but it is a positive change and may well apply to you. If you are eligible then it means that you do not have to satisfy “The work test”, i.e. working 40 hours in a consecutive 30 day period, in order to contribute to Super.

Again it is designed for those with relatively low balances and it cannot be used if your balance is in excess of $300,000.

It is applicable to anyone between ages 65 and 74 (obviously anyone under age 65 doesn’t need to satisfy the work test anyway).

YOU ARE ONLY ELIGIBLE IF YOU HAVE SATISFIED THE WORK TEST IN THE PREVIOUS FINANCIAL YEAR.

So essentially it is a 1 year extension of ones ability to add to Super after retirement.

In terms of the amount that can be added, all standard limits apply, i.e. $25,000 concessional, $100,000 non-concessional, and even the ability to use the bring-forward-rule.

Example 1: John was aged 64 when he retired in February this year and on the 10th July 2019 he turned 65. Previously, John would not be allowed to contribute anything further to Super from that date, having not satisfied the work test. Now however, he can contribute up to $325,000  -  $25,000 concessional and $300,000 non-concessional using the bring forward rule, having been age 64 when the financial year began.

Example 2: Larry is 69 and retired in March this year. With the new financial year having started, previously he could not contribute to Super. Now, given he satisfied the work test last financial year, he can contribute $100,000 non-concessional and $25,000 concessional. (He cannot use the bring forward rule because he was over age 65 on July 1st.


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