If you were planning on making extra contributions to superannuation and leaving it till the end of the financial year, think again.
Leaving it until June 30, to contribute means you will probably miss the deadline as your payment won’t be processed in time.
“As a general rule we tell clients to make their contribution by June 20. Some funds will accept cheques up to June 30 but using BPay could mean you need to allow up to five business days for processing,” said Darren James, a principal of MBA Financial Strategies.
That’s something you need to think about immediately and if in doubt contact your fund for details. HESTA told The New Daily its deadline was June 26, while AustralianSuper said it was June 20.
New contribution possibilities
Extra super contributions have become far more attractive to employees from this financial year because all now have the right to make concessional contributions up to the value of $25,000.
That means you can boost your personal contributions above what the boss makes for you under the Super Guarantee right up to that level, and get a tax deduction of the difference between your marginal rate and the 15 per cent super tax.
It’s flexible as you can do that in one payment at the end of the year rather than having a salary sacrifice arrangement in place with the boss for the whole year.
Concessional cap traps
But concessional caps for older people have been cut from $35,000 to $25,000 and this could create a problem for people who have been aiming at the larger target.
“Check with your fund or employer because you might find you will go over the cap,” said Steve Greatrex, principal of Wealth On Track.
If you look like going over the limit, end the salary sacrifice for the rest of the year, he says.
New rules mean you can now contribute up to $100,000 a year in non-deductible payment and these can be grossed up to $300,000 every three years. Make sure you get these contributions in before June 30, because Darren James, principal of MBA Financial Strategies, warns “it’s use it, or lose it”.
You can’t spread extra cash payments back to the previous year if you miss the due date.
Make sure you think of the rarely used spouse contribution provisions before the end of the year, advises David Simon, of Integral Private Wealth. It allows up to 85 per cent of any concessional super contributions to be made to a spouse’s account.
That could be useful for those approaching the $1.6 million contributions cap because by staying below that threshold they will be able to make further non-concessional contributions in the future.
It could also help pay off a mortgage by allowing a non-working partner to use tax-free income to make payments rather than using the after-tax income of the working partner.
When you retire and your fund goes into pension mode you are required to take out a minimum amount every year depending on age. This equates to 4 per cent of the fund from age 55, to 14 per cent if you make it to 95.
If you don’t take out the minimum, there are penalties, so check with your fund to make sure you have withdrawn what you need to by June 30, says Marko Savic, adviser with Noall & Co.
Research from Cbus and Industry Super Australia shows that Australians are missing out on as much as $5.6 billion in super payments from dodgy bosses trying to save money.
Check your balance and talk to your boss or your fund if you suspect underpayment, Mr James said.