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Written by Michal Park – Senior Adviser
Okay, now that we’ve done all we can pre 30 June, let’s consider a few post 30 June strategies:
1. Have you lodged your Notice of Intent to claim a tax deduction form?
Individuals who made non concessional (after tax) superannuation contributions through the year may reclassify them as concessional (taxable) if they, after assessing their tax position, need a deduction. To claim a deduction, the individual must submit a valid Notice of Intent to claim a deduction form AND the fund trustee must give the trustee an acknowledgement of receipt of the valid notice.
Whilst this Valid Notice does not have to be lodged prior to 30 June for the year in which you wish to claim the deduction it must be given to the trustee of the super fund and acknowledged in writing either prior to the individual lodging their tax return OR prior to 30 June the following year of the contribution.
IMPORTANT: If you are planning to commence a pension with your superannuation balance, you must send the trustee a valid notice, and receive acknowledgement of the valid notice, before commencing the pension, OR YOU WILL LOSE YOUR ELIGIBILITY FOR A TAX DEDUCTION.
2. Will you be splitting your concessional contributions with your spouse?
Anyone keeping up to date with Two Minute Tuesdays with Michal will know I discussed this strategy in the episode dated 15 June 2021. Superannuation contribution splitting allows individuals to transfer up to 85% of their concessional contributions made during the year to their (under age 65) spouse’s super account.
The benefit of superannuation splitting is to equalise the accumulation balances between spouses, which may help to maximise the combined total of superannuation savings they may transfer to a tax free retirement phase income stream.
Contributions can generally be split after the conclusion of the financial year in which the contribution is made and ONLY in that financial year.
IMPORTANT: A timing issue can arise for individuals wishing to claim a personal tax deduction for their contributions. These individuals must lodge their valid notice (see above) with the trustee nd have it acknowledged in writing BEFORE they apply to split.
3. How will you be paying your excess concessional contributions determination and/or Div 293 tax?
Higher income earners would be familiar with excess contributions and Div 293 tax. Those sneaky charges if your concessional contributions exceed $25,000 per annum and a doubly whammy if your income exceeds $250,000 and you have to pay an additional 15% on your taxable contributions.
Individuals may elect to have up to 85% of any excess concessional contributions released from their super fund in order to pay the income tax on their excess contributions. This request must be made to the ATO within 60 days from when the excess concessional contributions determination is issued.
Division 293 tax can be paid from an individuals own money OR from their super interest using a release authority. Like the above, if an individual wishes to pay the tax from super, the request must be made within 60 days of the issuance of the Div 293 notice of assessment.
IMPORTANT: If after 60 days any liability remains outstanding, the Commissioner will generally issue a release authority to the individual’s super fund. Moral – you can run but you can’t hide.
4. Does your asset allocation need reassessing?
Appreciating sharemarkets, pension clients drawing income payments, and the crazy lead up to 30 June has been a perfect storm which may have seen your portfolios move out of whack when compared against your risk profile. If this is a concern for you, consider gently moving some of your growth exposure back to defensive to provide some capital stability against the volatility of the sharemarkets.
IMPORTANT: Increasing defensive exposure in the current climate will potentially reduce your overall returns given the historically low cash rate environment. However, the purpose is to increase the part of your portfolio that is not as susceptible to market ups and downs, because WHAT GOES UP MUST COME DOWN.