Jun
18
Written by:
News Admin
18/06/2010 2:12 PM
In the lead up to 30 June 2010, individuals should consider topping up their superannuation by making either tax deductible (concessional contributions) and/or after-tax contributions (non-concessional contributions).
Concessional contributions
The concessional superannuation caps for the 2009/10 year are as follows:
| Person aged below 50 years of age at 30 June 2010: |
$25,000 |
Person aged 50 and over at 30 June 2010:
|
$50,000 |
Note that employer super guarantee contributions are included in these thresholds. Where a concessional contribution is made which exceeds these amounts, the excess is taxed to the fund member’s account at an effective rate of 46.5%.
The above contribution caps apply equally to self-employed taxpayers who can claim a 100% deduction where they satisfy the 10% test.
There is an age and work test that needs to be satisfied before a concessional contribution can be made. Where the individual is under the age of 65 at the time the contribution is made, this work test does not apply.
If the individual is aged 65 to 74 the work test needs to be satisfied every year before the contribution can be made. This requires that the individual be gainfully employed on at least a part time basis during the financial year and must work for at least 40 hours during a consecutive 30 day period in that financial year (before the contributions is made). To be gainfully employed, the person must receive some form of remuneration for personal services.
Note that employer and self-employed superannuation contributions need to be made before the person reaches the age of 75.
In order to obtain a deduction in the 2010 financial year, the contribution must to be received by the superannuation fund by 30 June 2010.
Non-concessional contributions
Individuals who are under the age of 75 are entitled to contribute up to $150,000 per annum in non-concessional or after-tax contributions for the 2009/10 year.
There is also a 3 year averaging rule which allows individuals under the age of 65 at any time during the financial year to make an undeducted contribution of up to $450,000 by 30 June. In other words, they can utilise the $150,000 cap for the current year and the next two financial years.
In these circumstances, the individual cannot make any further non-concessional contributions in the 2010/11 and 2011/12 financial years.
Where the individual is age 65 to 74, the above work test also applies before a non-concessional contribution can be made.
Super co-contributions
Individuals, including self employed business owners, who make an undeducted contribution of up to $1,000 are eligible to receive a co-contribution payment from the Government of up to $1,000 for the 2009/10 year.
However all of the following conditions need to be satisfied in order to be eligible for the co-contribution this financial year:
- the contribution is made by 30 June 2010 to a complying superannuation fund or retirement savings account;
- a tax deduction is not claimed for the contribution;
- The person’s total income is below the income threshold for the 2009/10 year of $61,920. Total income is worked out by adding assessable income, plus reportable fringe benefits and reportable employer super contributions minus “business” deductions. This means that self-employed taxpayers with high turnovers/low margins may still receive a co-contribution payment;
- 10% or more of the person’s total income is from running a business, eligible employment or a combination of both. Note that business deductions are not included in the 10% test;
- the person must lodge a tax return for the income year; and
- the person is less than 71 years old at the end of the income year.
To receive the maximum co-contribution of $1,000 for the 2009/10 year, the taxpayer’s assessable income (including reportable fringe benefits and reportable employer super contributions), must be less than $31,920 and a contribution of $1,000 needs to be made. The co-contribution of $1000 reduces by five cents for every $1 of assessable income over $31,920 and cuts out at $61,920.
In-specie contributions
An in-specie contribution is where an asset, rather than cash, is contributed to a self managed super fund (SMSF). The contribution can be made by an individual or the individual’s employer.
It is important to note that a SMSF is generally prohibited from acquiring assets from related parties such as members and relatives. However the following exceptions apply when the asset is contributed at market value and the asset is either:
- Listed Securities; or
- Widely held unit trust investments; or
- Business real property, or
- An in-house asset which would not result in the level of in-house assets exceeding 5% of the fund’s total asset value.
The transfer of an asset in-specie changes the legal ownership of the asset from the contributor to the SMSF. Therefore there may be stamp duty and capital gains tax implications.
In-specie contributions are included in the concessional and non-concessional caps.
Tax offset for spouse contributions
A resident individual can make a contribution on behalf of their resident spouse (legal or de facto, or same-sex and the spouse is not living permanently apart) and claim a tax offset of up to $540 where:
- the spouse is aged under 65, or
- the spouse is over the age of 65 and under the age of 70 and was gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in that income year (before the contribution is made).
- the sum of the spouse's assessable income, (which includes reportable fringe benefits and reportable employer super contributions) for the financial year was less than $13,800.
The contributions are treated as Personal Contributions (and therefore not subject to 15% contribution tax) and are preserved to the spouse’s preservation age.
An 18% tax offset is claimable when amounts up to $3,000 are contributed, reducing for every dollar that your spouse earns over $10,800. Therefore to receive the maximum tax offset of $540 (18% of $3,000), the spouse’s assessable income needs to be under $10,800.
If spouse assessable income exceeds $10,800 then the maximum $540 tax offset will reduce by 18 cents in the dollar until spouse income exceeds $13,800 at which point the tax offset no longer applies.