Six super strategies to consider before 30 June

5th May 2024

With the end of financial year fast approaching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2024.

Tip 1 – Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation, you may be able to use the carry forward concessional contribution (CC) rules (otherwise known as “catch-up concessional” rules) to make large CCs this year without exceeding your CC cap.

This strategy can allow you to carry forward any unused CC cap amounts that have accrued since 2018/19 for up to five financial years and use them to make CCs in excess of the general annual CC cap (currently $27,500 in 2023/24).

You can then make a CC using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) at 30 June 2023 was below $500,000.

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The taxation of super death benefits

17 April 2024

Wondering if your beneficiaries will pay tax on your superannuation death benefits? The answer is it depends on a number of important factors.

Most people will have heard of Benjamin Franklin’s quote “in this world, nothing is certain except death and taxes”. He raises a valid point as the tax office will be ready to take their share of your death benefits when the time comes.

With that in mind, it is important to understand the tax rules that govern superannuation death benefits so you can ensure your benefits are distributed to your beneficiaries in the most tax-effective manner possible.

This article briefly summarises the three key factors that will determine whether your superannuation death benefits will be taxed when distributed to your beneficiaries.

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Super contribution caps to increase on 1 July 2024

20 March 2024

For the first time in three years, the superannuation contributions are set to increase from 1 July 2024.

Contribution caps to increase

Due to indexation, the contribution caps will increase on 1 July 2024 as follows:

  • Concessional contributions cap – from $27,000 to $30,000
  • Non-concessional contributions cap – from $110,000 to $120,000
  • The maximum non-concessional contributions cap under the bring forward rules – from $330,000 to $360,000

What are concessional contributions?

Concessional contributions (CC) are before-tax contributions and are generally taxed at 15%. This is the most common type of contribution individuals receive as it includes superannuation guarantee (SG) payments your employer makes into your fund on your behalf. Other types of CCs include salary sacrifice contributions and tax-deductible personal contributions.

The government sets limits on how much money you can add to your superannuation each year. Currently, the annual CC cap is $27,500 in 2023/24.

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Qualifying as an interdependent or financial dependant

24 February 2024

A question that often gets asked when dealing with death benefit nominations is whether a person will qualify under the interdependency or financial dependency definitions. This is an important consideration as meeting the dependency criteria will enable potential beneficiaries to qualify as a dependant and therefore allow them to receive a death benefit.

Interdependency relationship

Put simply, an interdependency relationship exists between two people if all of the following conditions are met:

  1. They have a close personal relationship
  2. They live together
  3. One or both provides the other with financial support
  4. One or both provides the other with domestic support and personal care.

However, if two people satisfy the close personal relationship requirement but cannot satisfy the other three requirements, they can still satisfy the interdependency relationship if:

  • Either or both of them suffer from a physical, intellectual or psychiatric disability, or
  • They are temporarily living apart (eg, overseas or in gaol).

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Who can I nominate as my super beneficiary?

24 February 2024

Your superannuation death benefits must be paid to someone when you die. That somebody will usually be your estate or your nominated beneficiary (also known as your dependants).

Paying death benefits to your estate

Unlike other assets such as shares and property, your superannuation and any insurance benefits you have in superannuation do not form part of your estate. That’s because your superannuation is not held by you personally, rather it is held in trust for you by the trustee of your superannuation fund.

However, you can direct your superannuation death benefit to your estate by nominating your “legal personal representative” (LPR), who will usually be the executor of your estate.

If you nominate your estate or LPR, you must also specify in your Will who you want to distribute your superannuation money to. This can include eligible beneficiaries (see below) as well as anyone else you wish to leave your death benefits to.

As such, it’s important that the directions stated in your Will are up to date so your LPR pays out your death benefits (as well as your other estate assets) as per your wishes.

Paying death benefits to a beneficiary/dependant

If you want your superannuation death benefits to be paid to a person, that person must be a “dependant” for superannuation purposes.

The meaning of dependant is important as it determines who can receive a death benefit, whether the death benefit will be taxed and what form your death benefit can be paid out (ie, lump sum, income stream, etc). In particular, superannuation law determines who can receive your superannuation directly from your superannuation fund without having to go through your estate. These people are your superannuation dependants. Tax law on the other hand determines who pays tax on your superannuation death benefit. These people are considered tax dependants.

The following table summarises the difference between:

  • A superannuation dependant and tax law dependant, and
  • The types of death benefit that can be paid to each category of dependants.

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Give yourself a super gift this Christmas

18 December 2023

Give yourself the ultimate gift that doesn’t cost a thing – a super to-do list which is a gift that will benefit you now and in the future.

  1. Consolidate your super

With over 10 million unintended multiple superannuation accounts, these multiple accounts are costing Australians an extra $690 million in duplicated administration fees and $1.9 billion in insurance premiums per year, which is eroding many Australians’ hard earned superannuation benefits. If you are one of these individuals with multiple superannuation accounts, there may be benefits to rolling your accounts onto one superannuation fund.

Consolidating your superannuation is now easier than ever, using ATO online services or your myGov account. If you’re not sure whether you might have other superannuation accounts, you can search for lost or unclaimed super via the ATO or by logging into your myGov account linked to the ATO and clicking on Manage my super.

However before you consolidate your funds, there are a few things you should do, such as:

  • consider whether you have any insurance cover which may be lost when transferring benefits to a new fund, and
  • check on other details such as fees, insurance premiums, variety of investment options available, performance data, and tax implications from consolidating your superannuation to ensure the transfer provides you with better value and meets your needs.

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Are you eligible to make a personal deductible superannuation contribution?

18 October 2023

Personal deductible contributions can allow individuals to claim a tax deduction for contributions they have made to superannuation provided they meet certain requirements. So what are these requirements and what should you look out for?

Eligibility requirements

You will be eligible to claim a deduction for your personal superannuation contributions if:

  • You meet the aged based rules
  • Your taxable income is more than the amount you want to claim as a deduction (ie, your deduction can’t give you a tax loss)
  • You make the contribution to a complying superannuation fund
  • You give a special notice to your fund telling the trustee how much you want to claim
  • You give your fund that notice within strict timeframes
  • Your fund sends you an acknowledgement confirming your notice has been received and is valid

You must meet all of the above criteria otherwise you won’t be eligible to claim a deduction for your contributions.

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Superannuation and the right to delegate

17 September 2023

Another key Federal Court case may have a bearing on whether you owe certain workers you engage superannuation guarantee or not.

For background, early last year the High Court made a game-changing decision in determining whether a worker is an employee or contractor at common law. It ruled that this is determined by the employment contract / agreement and whether it contains the usual indicators that tend toward a finding that a worker is an employee at common law including:

  • Does the business have control over the worker (e.g. what hours they work and how they do they do the work)?
  • Must the worker perform the work personally (rather than having the ability to delegate or subcontract the work to an outside party)?
  • Is the worker paid like an employee (e.g. hourly rate)?
  • Does the business supply the tools and equipment for the worker?
  • Does the business bear the risk and liability to outside parties for any defects in the work?

Where the answer to most of those questions is yes, then the worker is an employee at common law.

Up until the High Court’s decision, lower courts were looking at how individual work arrangements were playing out in practice when answering the above questions. The High Court however ruled that you should instead look at the rights and obligations set out in the respective contract between the parties rather than how the situation plays out after the contract is signed. This is provided that the contract was not a sham.

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Superannuation and age pension eligibility

23 August 2023

Come retirement, many folks rely on a combination of their superannuation savings and the age pension in order to financially sustain them moving forward. Accordingly, a front-of-mind issue for individuals is: at what point does your level of superannuation savings and payments impact your eligibility for the age pension?

While you are under age pension age, in relation to any Centrelink payment, Centrelink do not count your or your partner’s superannuation balance in either the income or assets test if your fund is not paying you a superannuation pension. However, if your fund is paying you a superannuation pension, that pension is taken into account.

Once you reach age pension age, Centrelink counts your super both (a) in the assets test and (b) in the income test under the deeming rules. The same rules apply to your partner and their super when they are age pension age, even if they are not in receipt of a Centrelink payment.

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