Superannuation and SMSF

Superannuation Contributions for Spouses

• A tax rebate is available for super contributions on behalf of low-income spouses.
• The rebate is 18% of the contributions up to $3,000. The maximum rebate is therefore $540.
• The rebate is reduced where the spouse’s assessable income + reportable fringe benefits + reportable super contributions are in the range of $37,000 to $40,000.

Personal Contributions from After-Tax Sources

• The concessional and extremely tax effective nature of superannuation in Australia makes the contribution of discretionary personal funds (where available) into superannuation a strategy well worth considering.
• While income on assets held personally can be taxed at up to 47%, the same income in the superannuation environment is taxed at a maximum of 15%, and, where pensions are commenced, the income can be tax free (subject to the $1.9M balance transfer cap from 1 July 2023 which has the effect of taxing individual member benefits above $1.9M at a maximum of 15%).
• Taxpayers aged 18 to 75 years do not need to pass a work test in order to be able to make superannuation contributions. Taxpayers aged 67 years to 75 years will need to have worked in gainful employment for at least 40 hours in a consecutive 30 day period in that same financial year, to claim tax deduction for making concessional contributions. Taxpayers aged 75 years or older are currently unable to make personal superannuation contributions.
• The limit for personal non-concessional contributions from after tax sources is currently $110,000 per annum ($120,000 from 1 July 2024) with the opportunity to bring forward the following two year’s limit such that an undeducted contribution of up to $330,000 be made in year one ($360,000 from 1 July 2024) (see “Superannuation Re-contributions” above).
• Please be aware that contributions in excess of the above limits will be subject to tax at 45% if left in the superannuation fund. Excess non-concessional contributions made after 1 July 2013 can be withdrawn, together with 85% of the deemed associated earnings thereon, and taxed at the member’s marginal tax rate.  Contact us prior to 30 June if you believe the above contribution limits have been exceeded.
• The Tax Office has confirmed in a Tax Ruling that an “in-specie” contribution of certain assets (such as listed investments and business real property) into superannuation is acceptable, as long as certain criteria are met.

$1.9M SUPER TRANSFER BALANCE CAP

• A $1.9 million cap per person exists on the amount of superannuation benefits which can be held in the tax free pension phase. A maximum limit of $1.9 million can be kept in retirement phase to pay pensions. Earnings on investments within pension accounts (retirement phase) will continue to be exempt from tax. Superannuation balances above $1.9 million can remain in super in the accumulation phase. Income is taxed at 15%. Capital Gains are taxed at 10% if the asset is held for longer than 12 months.  These are still concessional rates of tax.
• Given the tax rates within superannuation are still concessional when compared to other entities such as companies, trusts and individuals, we recommend you consider retaining as much as possible of your existing funds within superannuation, particularly where your ability to make contributions in the future is or becomes limited.
• It is possible to segregate investments within a SMSF. The trustees may be able to select which specific assets will support the pensions (and will be tax free and CGT free) and which assets will be in the accumulation account (taxed at 15%) where the individual members combined superannuation entitlements are less than $1.9m.
• Where member balances are in excess of $1.9m segregation is not available.
• If your total superannuation balances are near to or over $1.9m you will need to contact us to discuss your circumstances and the action to be taken.

Self-Managed Super Funds

• • • Ensure that the in-house asset test is not breached (no more than 5% of the total market value of the fund’s assets to be held in most investments, loans or leases with related parties). There are some exceptions including business real property.
    • Ensure that artworks and collectibles purchased since 1 July 2011 satisfy the rules regarding storage, leasing, insurance and usage. Ensure artworks and collectibles purchased pre-1 July 2011 satisfy these rules from 1 July 2016.
    • Ensure that the fund’s investment strategy has been formulated, reviewed, updated and implemented and evidence is available of this strategy for audit purposes.
    • Trustees must consider whether the fund needs to hold life and TPD insurance for members. Review existing insurances to determine if it is more tax effective to hold the policies inside or outside of super.
    • Under “Super Stream” reforms all SMSFs must receive contributions from non-related employers electronically. Additionally, the employer must send an electronic message advising details of the contribution to the SMSF via an electronic service address (ESA) (see below).  If this is relevant to you, we recommend that you provide your employer with the following so that employer contributions can continue to be made to your fund:
    1. Fund ABN
    2. Bank details (BSB, Bank name and bank account number)
    3. Electronic service address – for this purpose there are many SMSF messaging providers listed on the ATO website at http://www.ato.gov.au/super/superstream/self-managed-super-funds/electronic-service-address/register-of-smsf-messaging-providers/
    • Confirm that the trust deed is up to date with the latest best practice and includes appropriate clauses to recognise recent legislative amendments such as transition to retirement income streams, non-lapsing binding death benefit nominations, release of excessive contributions, downsizer contributions etc.

Pension Stream

• • Ensure that the minimum pension for 2023/24 has been withdrawn by 30 June 2024 based on your age as follows. The current minimum drawdown percentages are outlined in the following table:

  Age at start or on 1 July	Current minimum drawdown % of account balance at pension commencement date or 30 June 2024
  Under 65	4%
  65-74	5%
  75-79	6%
  80-84	7%
  85-89	9%
  90-94	11%
  95 or more	14%

  • If you have commenced a transition to retirement pension, ensure that no more than 10% of the capital value of the income stream at the start date or 30 June 2024 whichever is later, has been drawn.

Early access to Superannuation Benefits

• Under the existing ‘compassionate grounds’ conditions of release, an individual can access their preserved superannuation benefits (as a lump sum), subject to any cashing restrictions, on a number of different grounds where certain specific conditions are satisfied. For example, an individual who satisfies certain conditions could access their superannuation entitlements under this condition of release in order to pay for certain medical treatment, or to enable the individual to make a repayment on a home loan in order to prevent the mortgagee selling their home.

Salary Sacrifice

• Significant tax savings can be achieved via salary sacrificing additional superannuation contributions or by including fringe benefits within your salary package.
• Importantly, salary sacrificing arrangements must be put in place prior to the period of service to be effective from a taxation point of view.
• With the availability of “transition to retirement income streams (TRIS’s)” (also known as “working pensions”), taxpayers who have reached their preservation age but wish to stay in the workforce can access their superannuation as a non-commutable income stream without permanently retiring. In certain circumstances it can be tax effective to salary sacrifice employment income into superannuation and use the working pension to pay living expenses.  Please contact our office if you would like to discuss this strategy further.
• If you are renegotiating your salary package for the next financial year you may wish to contact us to discuss these and other options available to you as there are a number of requirements to commence transition to retirement pensions. You should also take into account the new concessional contribution caps when working out the amount of any salary sacrifice superannuation contributions for the 2024/25 tax year.
• The amount that can be provided to employees of not-for-profit entities for salary sacrificed meal entertainment benefits has been limited to a grossed up cap of $5,000 with effect from 1 April 2016. This may reduce the tax and other benefits available to such employees from their salary sacrifice arrangements.
• Employees of small businesses (turnover under $10m from the 2016/17 financial year) may be provided with more than one work related portable electronic device, even where the functions are similar, without imposition of FBT, from 1 April 2016. Please note that from 1 April 2021 (i.e., the 2022 FBT year an onwards) the business turnover threshold has increased to $50 million.

Superannuation Payments by Employers

• • • When an employer pays superannuation, it can be in the form of an in specie transfer of specific assets (e.g. shares or business real property) without incurring fringe benefits tax.
    • Employers receive a tax deduction for all superannuation contributions made on behalf of employees. Please note however, that tax penalties at the individual’s marginal tax rate plus an interest charge apply to concessional (pre-tax) contributions (from all sources) in excess of the following limits:

    Age in Years at year end	Concessional Contributions Cap 2021/22	Concessional Contributions Cap 2022/23	Concessional Contributions Cap 2023/24
    Any Age	$27,500	$27,500	$27,500

    • Employers with 20 or more employees have been required to comply with the new SuperStream rules since 31 October 2015. These rules require employers to make all super contributions and associated contribution data electronically.  Employers will need certain information from each employee’s superannuation fund for this purpose as well as payroll software that conforms to SuperStream. Information required includes the details of the fund’s ABN and bank account as well as an electronic service address.  Employees with SMSFs also need to apply for this.   Smaller employers needed to comply with these rules by 28 October 2016.
    • From 1 July 2018 employers with 20 or more employees were required to report to the Commissioner through Single Touch Payroll-enabled software. The following information must be reported on or before the day you withhold from a payment (the pay day):
      1. payment information, including salary or wages, allowances, deductions, etc.
      2. withholding amounts
      3. superannuation liability information or ordinary times earnings (OTE).
    • Employers who fully report all the information required through Single Touch Payroll do not have to comply with a number of other reporting obligations under the existing law. This includes providing certain payment summaries and the corresponding payment summary annual report. They will need to provide a finalisation declaration through the relevant software.
    • STP became mandatory from 1 July 2018 for employers with 20 or more employees. Once you are setup, the option to report a payment to the ATO will be presented for each pay run and your payroll information will be filed with the tax office. Please contact us to discuss this further if you have any questions.
    • From 1 July 2019, STP was broadened to include all employers (i.e., including employers with 19 or less employees).
    • The new reporting rules essentially require ‘real time’ reporting of salary and wages, PAYG withholding and superannuation information to the ATO directly from their payroll software, giving the ATO almost instant access to key tax-related information.

Superannuation for the Self-Employed

• • • From 1 July 2017, individuals earning[1] more than $250,000 have their concessional superannuation contributions taxed at 30% rather than 15%. Despite this increased rate, concessional superannuation contributions can still be a tax effective strategy for higher income earners.
    • A tax deduction for superannuation contributions was available to self-employed, or substantially self-employed, persons. Deductibility has been expanded to all taxpayers under age 75 from 1 July 2017.
    • Superannuation is only deductible when paid. Contributions for the June 2023 quarter must be received by the relevant Fund by 30 June 2023 for a deduction to be claimed in 2022/23.
    • Contributions for the self-employed are tax deductible. Please note that tax penalties apply if you exceed the contribution caps (the concessional contributions cap is $27,500 from 1 July 2021).
    • Please contact us prior to 30 June if you believe the above contribution limits have been exceeded.
    • Taxpayers aged 18 to 75 years do not need to pass a work test in order to be able to make non-concessional superannuation contributions. Taxpayers aged 67 years to 75 years will need to have worked in gainful employment for at least 40 hours in a consecutive 30 day period in that same financial year, to claim tax deduction for making concessional contributions. Taxpayers aged 75 years or older are currently unable to make personal superannuation contributions (concessional and non-concessional).

    [1] For this purpose earnings includes taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment losses, target foreign income, tax free government pensions and benefits, less child support.