From 1 July 2017 individuals may be able to claim a personal tax deduction for contributions to superannuation.  (Prior to this, individuals could only claim a personal tax deduction if they were substantially self-employed.)

If you want to claim a personal tax deduction, you will need to:

1. Ensure the contributions are received by your superannuation fund prior to 30 June;

2. Give your superannuation fund a “Notice of Intention to Claim a Deduction for Personal Super Contributions”;

3. Receive an acknowledgement letter from your fund prior to lodging your 2018 tax return.

Remember that the maximum concessional (deducted) contribution that individuals can claim for the 2018 year is $25,000.  If you are an employee and you wish to make additional deducted superannuation contributions (on top of the contributions made by your employer), you will need to ensure that the combined contributions do not exceed the $25,000 concessional cap.

If you would like to discuss your eligibility to claim a deduction for a personal superannuation contribution, please call us on (07) 56656469.

Presently, employers with 19 or fewer employees or an annual turnover of less than $10 million can use the free Small Business Superannuation Clearing House (SBSCH) to pay their employees’ superannuation guarantee contributions. Employers can make one single payment to the SBSCH. The SBSCH will then distribute this payment to the relevant superannuation funds.

From early 2018, access to the SBSCH will be transferred to the ATO’s Business Portal. From this point, the SBSCH will no longer be accessible through its current website using your user ID and password.

If you do not have access to the Business Portal (and do not wish to setup access), we can still access the SBSCH on your behalf through our Tax Agent Portal.

It is important that you are aware of your options once the current method of accessing the SBSCH ceases in 2018.

The ATO are running a free webinar on Wednesday 29 November to give you more information about how to access the Business Portal and what services are available through the Business Portal. Click here to register for the webinar.

If you would like to discuss how these changes will impact on your business, please call us on (07) 56656469.

On 21 September 2017, the ATO announced the latest figures on lost and unclaimed superannuation.

At 30 June 2017, there was almost $18 billion in lost and ATO-held superannuation accounts Australia-wide.

The ATO’s report also breaks down the lost super accounts by postcodes. TJN Accountants is located in Helensvale (postcode 4212). In Postcode 4212, there is a total of $17.8 million in lost and ATO-held superannuation accounts. Find out the amount of lost super for your postcode here.

A super account is considered “lost” when the fund loses contact with the member. By law, after a period of time, lost super accounts are transferred to the ATO and held as unclaimed super accounts.

People can lose contact with their super funds when they change jobs, move house or do not update their details with the fund. There are almost 2.3 million Australians with 3 or more super accounts. Multiple super accounts generally means multiple fees and charges.

The Assistant Commissioner Debbie Rawlings said the easiest way for people to keep track of their super and find lost super is to use the ATO online services through myGov. You can use myGov to track down lost super and transfer it to a fund of your choice.

Once you have linked your myGov account to the ATO online services, you can view all of your super account details (including any lost accounts) and you can choose to claim or transfer the super accounts online.

Please give us a call on (07) 56656469 if you want more information on finding your lost superannuation accounts.

If you are a trustee of a self-managed superannuation fund (SMSF), you must give the ATO written notice within 28 days if there is a change to any of the following:

• the name of the fund
• the address of the fund
• details of the contact person for the fund
• the membership of the fund
• the trustees of the fund
• the directors of the fund’s corporate trustee
• the SMSF’s bank account details (as notified to the ATO)
• the electronic service address for the fund.

Please contact us on (07) 56656469 if you would like assistance with notifying the ATO of any of these changes to your SMSF.

Concessional contributions cap

Concessional superannuation contributions are contributions for which a tax deduction has been claimed.  Currently, the concessional contribution cap is $35,000 for people aged 49 and over and $30,000 for people aged 48 and under. 

From 1 July 2017, the concessional contribution cap will reduce to $25,000 to all taxpayers.

Unused concessional contribution cap

As outlined above, from 1 July 2017, the concessional cap for all taxpayers is $25,000.  From 1 July 2018, taxpayers with a superannuation balance of less than $500,000 can carry forward any unused concessional cap for up to 5 years.

10% test

Currently, in order to claim a tax deduction in their individual tax return for super contributions, an individual must be substantially self-employed (or substantially not employed).  This is determined using the 10% income test.

To satisfy the 10% rule, an individual’s employment income must be less than 10% of their total income (defined as assessable income + salary sacrificed contributions + reportable fringe benefits).

Essentially, individual super contribution deductions are currently limited to taxpayers that are self-employed or have a majority of their income from investments. 

From 1 July 2017, any individual taxpayer can claim a tax deduction for contributions to super regardless of their work circumstances (subject to the concessional contributions cap (above) and the work test (below)).

Work test

Currently, taxpayers aged 65 or over (but under 75) need to satisfy the work test before a contribution can be made into super on their behalf.  The work test is satisfied where a taxpayer is gainfully employed for at least 40 hours in a 30 consecutive day period in the financial year in which the contribution is made.

While there was a proposal that the work test be repealed, this proposal was not passed.  As such, the work test will remain in place.

Call us today on 56656469 if you would like to discuss how these changes may apply to you.

Currently, individual taxpayers who have more than $300,000 ‘income for surcharge purposes’ pay an additional 15% tax on concessional (deducted) superannuation contributions.  This charge is imposed by Division 293 of the Income Tax Assessment Act and is, therefore, known as Division 293 tax.

From 1 July 2017, the threshold will reduce to $250,000.

Income for surcharge purposes

In determining whether a taxpayer as exceeded the $250,000 threshold, “Income for surcharge purposes” includes:

* taxable income;

* total reportable fringe benefits;

* net financial investment loss;

* net rental property loss;

* net amount on which family trust distributions tax has been paid; and

* concessional superannuation contributions made within the concessional cap for the financial year.

Income for surcharge purposes does not include:

* super lump sum taxed elements with a zero tax rate.

Contributions subject to 15% tax

If a taxpayer’s income for surcharge purposes (outlined above) exceeds $250,000 for the 2018 year (which commences 1 July 2017), they will be liable to pay 15% tax on concessional super contributions above the $250,000.

For example, if the taxpayer’s income is $230,000 plus they had concessional contributions of $25,000 – the total income for Div 293 purposes is $255,000.  As this goes over the threshold, the taxpayer will be liable to Div 293 tax.  The amount of Div 293 tax is 15% of the contributions over the $250,000 threshold – so, in this case, 15% x $5,000.

If a taxpayer’s income is $260,000 plus they had concessional contributions of $25,000 – the total income for Div 293 purposes is $285,000.  Again, as this goes over the threshold, the taxpayer will be liable to Div 293 tax.  The amount of Div 293 tax is 15% of the contribution over the $250,000 threshold.  As the taxpayer’s income (without the contributions) is over the $250,000 threshold, all of the concessional contributions (that is, $25,000) will be subject to the 15% tax.

The ATO have released a video explaining the basics of the operation of Division 293 – accessible here.

Payment of Div 293 tax

Taxpayers can choose to pay the additional tax liability by using their personal savings or from their superannuation member balance.

Our comment

We recommend that all taxpayers review their potential liability to Division 293 tax.  A taxpayer may have taxable income of less than $250,000 but the additional inclusions (for example, rental property losses) may tip them over the threshold. 

Call us today on 56656469 if you would like to discuss how these changes may apply to you.

Non-concessional contributions are contributions for which no tax deduction has been claimed (that is, they are after-tax contributions).  Currently, the cap for non-concessional contributions is $180,000 per annum.  Taxpayers under 65 years of age can also access the 3 year bring forward rule which enables them to make a contribution of 3 x the cap (that is, 3 x $180,000 or $540,000) in one year (and then no further contributions for the next 2 years).

From 1 July 2017, the annual cap for non-concessional contributions will be reduced to $100,000 for taxpayers with total superannuation account balances of less than $1.6 million. 

Members with total superannuation account balances of $1.6 million or more will not be able to make any non-concessional contributions. 

3 year bring forward rule

Access to the 3 year bring forward provisions also depends on the total superannuation account balance of the member as at 30 June of the previous financial year:

• Taxpayers with a total superannuation account balance of less than $1.4 million – can access the full 3 year bring forward provisions and make a non-concessional contribution of $300,000 in one year and no further non-concessional contributions in the next 2 years.
  

• Taxpayers with a superannuation account balance between $1.4 million and $1.5 million – can only bring forward 2 years of non-concessional contributions ($200,000)
  

• Taxpayers with an account balance between $1.5 million and $1.6 million – can only make the annual non-concessional contribution ($100,000)
  

• Taxpayers with an account balance over $1.6 million – cannot make any non-concessional contributions.

Further, if a member has triggered the 3 year bring forward provisions during the 2015/16 or 2016/17 years and didn’t fully utilise the bring forward cap before 1 July 2017, the bring-forward cap will be subject to transitional rules.

Other considerations for making non-concessional contributions

If you are aged between 65 and 74, you must satisfy a work test in order to make superannuation contributions (that is, you must be gainfully employed for more than 40 hours over a 30 consecutive day period).  If you are 75 or older, you cannot make voluntary superannuation contributions.

Our comment

Members with an account balance in excess of $1.6 million need to be careful not to inadvertently make a non-concessional contribution.  This can occur in a number of ways, for example:

• Paying expenses on behalf of the superannuation fund with private funds;

• Exceeding the concessional contributions cap.

Members looking to make substantial non-concessional contribution will need to plan the manner in which they do this to ensure they stay within the relevant caps.  For example, taxpayers may wish to take advantage of the 3 year bring forward rules during the 2016-17 financial year which will enable them to contribute $540,000 (whereas the same cap in the 2017-18 financial year will only enable the to contribute $300,000).

Call us today on 56656469 if you would like to discuss how these changes may apply to you.

From 1 July 2017, there will be a limit to the amount a superannuation member can have in a tax-free pension account.  The limit is $1.6 million from 1 July 2017. 

If the member has a balance of more than $1.6 million in super, only $1.6 million of this balance can be held in a tax-free account-based pension account.  The balance over $1.6 million will need to remain in accumulation (or be commuted back to accumulation for existing pensions) – the earnings on which will be taxed at 15%. 

If the pension account has a balance of more than $1.6 million as at 1 July 2017, the ATO will direct the trustee of the fund to commute the excess over $1.6 million back to accumulation, together with any deemed earnings on the excess.  The individual will also be liable for excess transfer balance tax on these earnings.

Once the tax-exempt pension account has been established, subsequent earnings on this balance will not be required to be withdrawn to take the balance back to $1.6 million (similarly, if the account drops below $1.6 million, a top-up contribution cannot be made to bring the account back to $1.6 million).

The cap will apply to:

• All existing pensions at 1 July 2017

• All new pensions started on or after 1 July 2017

• Transition-to-retirement income streams converted to an account-based pension

• For reversionary pensions, 6 months after the date of death

The $1.6 million cap will be indexed in $100,000 increments in line with the Consumer Price Index (CPI).  However, if a member utilises the full $1.6 million transfer cap, they cannot take advantage of future $100,000 CPI increases.  If the $1.6 million cap is not fully utilised, the member can take advantage of the future $100,000 cap increases.

Who does this affect? 

This measure will have a direct impact on members who have a current pension balance over $1.6 million.  These members will need to take immediate action to comply with the new provisions from 1 July 2017.

This measure will also have a future impact on members that have an accumulation balance of over $1.6 million that may be looking to convert this balance to an account based pension at a later date.

Call us today on 56656469 if you would like to discuss how these changes may apply to you.