With 30th June fast approaching, now is the time to review your superannuation and pension strategy to ensure you maximise your family’s financial position whilst complying with the numerous rules and regulation.
Superannuation in accumulation phase
Maximise Concessional Contributions (CCs) – the maximum that can be contributed as concessional (pre-tax) contributions is $25,000 this financial year. These are the superannuation guarantee and salary sacrifice contributions. If there is a shortfall, individuals can make up the difference and claim a tax deduction in their personal tax return. Self-employed people can also contribute up to $25,000 into their super and claim this full amount as a tax deduction.
Maximise Non-Concessional Contributions (NCCs) – in addition to the above, individuals can make after tax contributions (called NCCs) of up to a further $100,000 per year currently. Up to 3 years’ worth of these contributions can be made in a single contribution (that is up to $300,000) with a number of special rules applying. These contributions are restricted if the individual’s account balance already exceeds certain levels. This strategy may be appropriate for an individual who has sold other assets, sold a business or inherited money from an estate.
In certain circumstances, contributions can be made by way of the transfer of an existing asset rather than cash (for example, shares). Such contributions are a little trickier and getting proper advice would be a good idea.
Superannuation in pension phase
Making sure the minimum pension is paid – individuals who are being paid a pension from their fund or who started a pension during the financial year must ensure they have drawn out the minimum legally required pension payment for the financial year. It’s particularly important that SMSF members ensure that there is enough cash available to make these cash payments, so they don’t have to sell other assets.
The minimum pension amounts required to be paid each year vary based on the age of the pension recipient.
Failure to make the required minimum pension payment in the financial year will result in the member’s account losing its pension status and the associated tax benefits for that year.
A few other things to think about…
Investment strategy – the end of the financial year is a good time to review your fund’s asset allocation and specific investments strategy to ensure you are not taking any unintended risks with your money and are suitably protected against volatile markets.
Estate planning – if you have been putting off that conversation about what happens to your super and other estate assets when you pass away or your simply haven’t looked at your estate plans for a while, now is a great time to address this issue.
Labor’s tax and super proposals – with the polls pointing to the strong possibility of Labor federal election win this weekend, our March 2019 client newsletter outlined the key superannuation and tax changes the ALP propose to make. The impact will be significant and pervasive. With a number of the proposed changes due to commence from July 2019, these changes may materially impact your family’s financial strategy. It may make sense to seek further advice in the near term to determine what action may be required.
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