For the next few weeks, we’ll review some of the super contribution issues and then look at year-end tax issues for your SMSF.
Concessional contributions cap
All employer contributions – even those that can’t be claimed as a tax deduction – are counted towards your concessional contributions cap.
This year, for everyone, the cap is $25,000. (See Paul Rickard’s article above for potential changes to this cap in coming years.)
Taking into account the rules mentioned above, if you run your own business via a company, then your employer contributions above the cap are tax deductible.
You might decide that receiving a 30% tax deduction in your business and paying 46.5% tax on super contributions above your cap is worthwhile. Before making this decision I suggest you receive good advice from your business advisers. The answer you reach might be different if you will have to pay the higher income earners additional super tax, which comes into play this financial year.
Salary sacrifice agreements (SSA)
If you have an SSA with your employer, then you need to make sure your employer makes contributions when they’ve agreed to make them. There are a number of excess contributions tax cases where employers have made contributions later than agreed and this has caused an employee’s cap to be breached and tax penalties have been applied.
We discussed SSAs in much more detail in June last year.
Timing of contributions
If you want a tax deduction for your super contributions, then you need to make sure the contributions are made on time.
If you want to claim your employer contributions as a tax deduction this year, then you need to make sure those contributions are in your super fund’s bank account by 30 June (which is a Sunday this year).
If you intend to use online direct debit facilities or B-Pay, then remember that delays can occur, particularly over weekends.
You are taking an unnecessary risk performing an electronic transfer on 28 June (Friday) and expecting the transaction will be completed by the following Sunday night.
Also, if you intend using a cheque just before 30 June to make contributions, then I suggest you bank this cheque after that date. It’s possible that the bank could place this money into the wrong account before 30 June, which would cause you to lose your tax deduction. This unfortunate event has occurred to at least one taxpayer.
We’ll walk through the rules and procedures for claiming a personal contribution as a tax deduction.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report
- Paul Rickard: Budget – mostly a yawn, with some benefits for downsizing
- James Dunn: Bumper bank season for the Big Four
- Alex Milton: Fundie’s favourite – NovaPort on Kathmandu Holdings
- Geoff Wilson: Listen to Buffett – this too will end
- Ron Bewley: Time to rotate into the resources sector
- Tony Negline: Question of the week – can my SMSF part-own my farm?