Superannuation Tax Benefits Pre 30 June 2021
With 30 June 2021 on a Wednesday your super fund must receive your contribution by then to have it counted in the 2020-2021 financial year. A contribution is generally made and counted towards your contribution cap when the superannuation fund receives it. The key ingredient is ensuring enough time is allowed for the transfer of funds.
Eligibility to contribute to superannuation depends on age. Those age under 67 can contribute but if you are aged 67 to 74 you must meet a work test to contribute - which is 40 hours of gainful employment in 30 days. All is not lost if you do not meet the work test in 2020-2021 - you can still contribute under the work test exemption if you satisfied the work test in 2019-2020 and had a total superannuation balance of less than $300,000 at 30 June 2020.
Making a personal concessional contribution for which you can claim a tax deduction is straight forward as long as you contribute no more than the $25,000 cap for concessional contributions. If you also have employer contributions made for you by an employer for example then you need to be aware that they will count towards your $25,000 concessional contribution cap. You must ensure you provide your super fund with a notice of intent to claim a tax deduction and have it acknowledged by the superannuation fund trustee.
Be mindful also that you cannot create a tax loss by claiming a tax deduction for a personal contribution ie you cannot claim a tax deduction greater than the balance of your taxable income (no matter the amount of your contribution). In addition remember that a personal superannuation contribution is taxed at 15% in the superannuation fund and if your marginal rate of tax is less than or equal to this then you lose a tax benefit from making a personal contribution because of the effect of tax arbitrage. So if your taxable income for example is below the effective tax free threshold of $23,226 (after tax offsets applied) or for those eligible for the seniors and pensioners tax offset it becomes $33,898 for singles and $30,593 for each person of a couple then your tax benefit becomes nil.
If you didn't utilise the full $25,000 concessional contributions cap in the 2018/2019 and/or 2019/2020 Year's and have a total superannuation balance of less than $500,000 at 30 June 2020 then you can utilise your unused caps and contribute the same in 2021. This can be very advantageous if you have for example a capital gain that would abnormally increase your taxable income and need to mitigate this additional taxable income - a catch up contribution can serve this purpose. In another positive for planning purposes unused concessional contributions caps can be carried forward for a rolling 5 year basis.
A spouse concessional contribution will not increase your own tax deductions but will potentially reduce your tax payable. The age limit for spouse contributions has increased from 67 to 74 with the requirement that the receiving spouse must meet the work test from 67. Contributing a spouse contribution may result in a tax offset of up to $540 for a non concessional contribution to your spouses superannuation fund.
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