Your Guide to Superannuation top-ups for June 2022
Superannuation Contributions 2022
At this time of year, you may be considering topping up your superannuation contributions and perhaps claiming a tax deduction. There have been a number of changes to the superannuation concessions in the past few years and so we present this summary to help clarify the new rules.
We are not licensed financial advisers so we make no recommendation as to whether you should actually make, increase or decrease superannuation contributions. Superannuation funds are deemed to be “financial products” by the Corporations Law. Taxation is not the only consideration when considering investing in a financial product. You should consider seeking advice from the holder of an Australian Financial Services Licence.
Please contact us if you require further information or clarification of the information presented or seek independent financial advice from a licensed financial adviser.
Concessional (tax deductible) contributions cap: $27,500
The Government has increased your concessional contribution cap for the 2021/2022 financial year to $27,500.00
Your concessional contributions cap includes 10% compulsory Superannuation Guarantee contributions and any “salary sacrifice” contributions paid by your employer on your behalf.
Your concessional cap also includes any personal contributions you make and that you wish to claim a tax deduction for in your personal tax return for 2021/2022.
Any remaining concessional cap not used by your employer can be claimed by you as a personal tax deduction. The Government made this change to improve the flexibility of the super system so that more employed Australians can use their full concessional contributions cap.
Carry-forward Concessional Contributions
You may be able to carry-forward any unused amount of your concessional contribution cap not used in the 2019, 2020 and 2021 financial years and use it this financial year.
To be eligible to carry forward any of your unused concessional cap:
You must have had a total superannuation balance (all of your superannuation entitlements across all superannuation funds) of less than $500,000 at 30 June 2021.
You may only claim a tax deduction for any carried forward concessional cap amounts from a previous financial year, over a rolling five year period. Amounts carried forward that have not been used after five years will expire.
This change may make it easier for small business owners with varying cash flow, or people with varying capacity to save, to contribute to superannuation and benefit from the tax concessions, as do those with regular incomes.
You can find out if you have a carry-forward concessional cap through your MYGOV account at ATO/Super/ Carry forward concessional contributions. Alternatively, contact your personal tax agent or accountant who can obtain this information from the ATO on your behalf.
Timing is important!
Whether paid personally or by an employer, in order to be tax deductible contributions must be “in the hands of the superannuation fund” no later than 30 June 2022. It will be important that contributions are paid at least a few days before 30 June.
The ATO have ruled that even though a contribution payment has left your business or personal bank account, it will not be tax deductible unless received and banked by the superannuation fund. Internet transfers that do not reach a superannuation fund’s bank account by 30 June, are not tax deductible. It is possible that a direct transfer from your bank account, or BPAY say on Tuesday 28 June 2022 may not reach the fund’s bank account by 30 June 2022 and won’t be tax deductible, so act early!
For example, for employer’s using the ATO’s Small Business Superannuation Clearing House the ATO have advised business owners that in order to allow for normal processing times, contributions need to be paid to the ATO by 5.30pm on Thursday 23 June 2022, a week before 30 June 2022. We recommend that you check with your own superannuation fund for similar cut-off times for accepting contributions.
Non-Concessional (undeducted) contributions cap: $110,000
Non-concessional contributions to superannuation are not taxable when received by a superannuation fund and are also not tax deductible, but do allow you to invest your personal savings in a superannuation fund and enjoy low rates of tax on the investment earnings.
The non-concessional cap for 2021/2022 has been increased to $110,000 per person. New rules prohibit non-concessional contributions completely where your total superannuation balances in all superannuation funds equalled or exceeded $1.7 million on 1 July 2021.
The “Bring Forward” Rule
For those under age 67, a “bring forward” rule may apply which will allow you to contribute up to $330,000 (3 x $110,000) now, and the remainder of that balance (if any) over the next 2 financial years. You must have less than $1.48 million in your total superannuation balances across all superannuation funds at 1 July 2021 in order to be eligible to use the full bring forward amount of $330,000. Even if you are currently aged 67 or more, you can qualify for the bring forward rule if you were at least age 66 on 1 July 2021.
If you triggered the bring forward rule in either the 2020 or 2021 financial years, your bring forward cap remains at $300,000. You do not benefit from the increase to $110,000 in 2021/2022 until after your bring forward period has expired.
Contributions After Age 67 – Changes to the Work Test
If you are currently retired, and under age 67, you may be able to make voluntary contributions to your superannuation fund this financial year.
Age 67 and over?
If you are currently aged between 67 and 74 you may still be able to contribute to superannuation if you pass the work force participation test. This “work test” requires you to have worked in paid employment or self-employment of at least 40 hours within 30 consecutive days at any time within the financial year before a voluntary concessional or non-concessional superannuation contribution can be made.
The work test exemption
Australians aged 67 to 74 may still be able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test. To be eligible you must have:
Satisfied the work test in the financial year before the year in which you made the contribution e.g. for the 2021 financial year, you worked at least 40 hours within a 30 day period between 1 July 2020 and 30 June 2021; and
Your total super balance as at 30 June 2021 (from all of your superannuation accounts) is less than $300,000.
You haven’t previously used the work test exemption
Over age 75?
If you are aged 75 or more, you cannot contribute to a superannuation fund. If employed, your employer is still required to pay compulsory contributions of 10% of your wage, but you cannot elect to make your own additional salary sacrifice or personal contributions.
2023 – Work Test Abolished
The Government has abolished the work test from 1 July 2022. For the 2022/2023 financial year and future years, anyone under age 75 can make contributions to superannuation, regardless of whether or not they are working or retired. Note, that this change does not apply to this financial year (2021/2022).
Government Co-Contribution
If you are a low or middle-income earner and make personal non-concessional contributions to your super fund, the Government will also make a contribution (called a co-contribution) to your fund, up to a maximum amount of $500. To receive the maximum Government co-contribution, you must:
Be less than 71 years old at the end of the financial year on 30 June 2022
Have assessable income* in 2021/2022 of less than $41,112 and 10% or more of that income must come from employment or carrying on a business;
Have made at least $1,000 of personal (undeducted) contributions to your super account during the financial year, but no more than your non-concessional contribution cap of $110,000.
You had less than $1.7 million in total combined superannuation entitlements as at 1 July 2021
* assessable income + fringe benefits + salary sacrifice super contributions (if any)
A partial co-contribution may be available where your income is between $41,112 and $56,112.
Low Income Super Tax Offset
The low-income super tax offset (LISTO) is a Government super payment of up to $500 to help low-income earners save for retirement. For 2021/2022, if your income is less than $37,000, the Government will refund the 15% tax paid on any concessional superannuation contributions made on your behalf, up to a maximum amount of $500. This means that most low-income earners will pay no tax on their super contributions. You do not need to apply for this tax offset. If you are eligible it will be applied automatically when you lodge your personal income tax return for 2022.
Contribution Splitting
When you split your contributions, you transfer or roll over a portion of the contributions you recently made to your super account, to your spouse’s super account.
This can be a useful technique in evening up the superannuation balances between spouses and maximising the available superannuation concessions in the future e.g. the $1.7 million personal cap on superannuation when transferring to the pension phase.
You can split concessional (taxable) contributions but not non-concessional (undeducted) contributions
You can split up to 85% of your concessional contributions, including compulsory 10% contributions made by your employer. Only 85% can be split as your superannuation fund must first deduct the 15% contributions tax.
You cannot split contributions if you are over age 65, or under age 65 and retired.
You can only elect to split contributions with your spouse after the end of the financial year
You need to complete an ATO Contribution Splitting Application Form and send it to your superannuation fund, after the end of the financial year.
Spouse Contributions Tax Offset
The Government has extended the spouse tax offset to assist more couples who support each other in saving for retirement. You can claim a personal tax offset against your tax payable of up to $540 for non-concessional contributions made on behalf of your dependant spouse. The tax offset is calculated at the rate of 18% of the contribution made, so a contribution of $3,000 x 18% attracts the maximum tax offset of $540 against your personal tax payable.
Eligibility:
You and your spouse are resident taxpayers, living together
Your spouse was under age 75 at 1 July 2021
You make non-concessional contributions to a superannuation fund in the name of your spouse
Your spouse has not already made maximum non-concessional contributions for the year and has less than $1.7 million in total superannuation entitlements at 1 July 2020
Your spouse’s income* is $37,000 or less
You claim the spouse contribution in your personal income tax return
*assessable income + fringe benefits + salary sacrifice super contributions (if any)
A partial offset is available where your spouse’s adjusted income is over $37,000 but less than $40,000.Superannuation Contributions 2022