Superannuation

You may have options when you change jobs which could include:

• You can keep your existing fund and instruct your employer to make super contributions to this fund (there may be instances where this is not possible for certain employment sectors such as healthcare)
• You can keep your existing fund and instruct your employer to set up a new super scheme for you (this may be appropriate if you have insurance in your existing scheme that you want to maintain)
• You can instruct your employer to set up a new super scheme for you and transfer (rollover) your existing super balance to the new scheme(be very careful if you have insurance cover in your existing scheme)

The government places restrictions on when you can access your super so you can only access it if you have satisfied a condition of release such as:

• Retiring permanently from the workforce on, or after, reaching your preservation age
• terminating your employment after you reach 60
• reaching 65
• becoming temporary or permanently incapacitated
• having a terminal medical condition
• death.

Your preservation age depends on your date of birth:

Some conditions of release allow the partial cashing of benefits, including:

• compassionate grounds
• financial hardship.

In some instances, if withdrawals are made under age 60 there could be some tax consequences relating to the taxable component of the super withdrawal.

Spouse contributions are non-concessional contributions made by a person on behalf of their spouse. The contributor can claim a tax rebate of 18% (up to $540) for the first $3,000 of spouse contributions made, provided the spouse has assessable income of $37,000 or less.

Over this threshold, the rebate reduces by 18 cents for every $1 of income and reduces to $0 where the spouse’s income is greater than $40,000.

The amount you contribute will count towards the receiving spouse’s non-concessional contributions cap and the receiving spouse will need to have a super balance below the total super balance cap to receive the contribution.

Spouse contributions are non-concessional contributions made by a person on behalf of their spouse. The contributor can claim a tax rebate of 18% (up to $540) for the first $3,000 of spouse contributions made, provided the spouse has an assessable income of $37,000 or less.

Over this threshold, the rebate reduces by 18 cents for every $1 of income and reduces to $0 where the spouse’s income is greater than $40,000.

The amount you contribute will count towards the receiving spouse’s non-concessional contributions cap and the receiving spouse will need to have a super balance below the total super balance cap to receive the contribution.

If your total super balance as at the 30th June of the previous year is greater than $1.6 million you cannot make non-concessional contributions to super.  You will still be able to make concessional contributions up to the annual cap which is currently $25,000.

Furthermore, you may only use $1.6 million of your superannuation balance to start a tax free pension, known as your transfer balance cap.  Any balance over $1.6 million must been retained in your accumulation superannuation where the earnings are taxed at 15%.

If you are over age 65 and sell your principle residence which you have lived in for 10 years or more, you can make a “downsizer” contribution of up to $300,000 into superannuation (up to $600,000 for a couple).

• Downsizer contributions provide greater flexibility for many older people to top up their superannuation balances because:
• They are not counted against your concessional or non-concessional caps;
• They can be made regardless of the member’s total superannuation balance, and
• They are not subject to the “work test”, which otherwise requires a member over 65 to have worked a minimum of 40 hours in any period of 30 consecutive days before a contribution is made.
• However, it is essential to understand the rules before making any contribution.

Your home must have been owned by you, your spouse, your former spouse, or the trustee of your deceased spouse for the 10 years prior to you selling.

You must be 65 or older, the contribution must be made to a complying superannuation fund and you must not have previously made a downsizer contributions in relation to an earlier disposal of a main residence.

The amount of the contribution must be equal to, or part of, the proceeds from the sale of you home.  The sale of your holiday house, investment property, caravan, houseboat or other mobile home does not qualify.

Despite the name “downsizer”, it isn’t necessary to purchase a replacement main residence in order to qualify.  However, the contribution must be made within 90 days after ownership of the main residence changes (usually 90 days after settlement).  You must complete and submit ATO downsizer contribution form to your super fund that either before or at the time you make the contribution.

The transfer balance cap is a limit on how much superannuation can be transferred from your accumulation superannuation account to a tax-free ‘retirement phase’ account. The general transfer balance cap is currently $1.6 million and all individuals have a personal transfer balance cap of $1.6 million.

There are two types of super contributions:

Concessional contributions:  Also known as ‘before-tax’ contributions and include:

• Employer contributions (compulsory 9.5% superannuation guarantee)
• Salary sacrifice
• Personal contributions which you claim a tax deduction for

These contributions are taxed at 15% as they enter the fund.

Non-concessional contributions:  Also known as ‘after-tax’ contributions and include:

• Personal contributions you make as a super fund member and don’t claim as a tax deduction in your income tax return. These are often called ‘voluntary’ contributions.
• Spouse contributions are made directly into your spouse’s super account. This can be a tax-effective way for a couple to save for retirement if one partner is only working part-time or has a low income.

These contributions do not incur contribution tax.

There are limits on the super contributions you can make to your super fund each year depending on the type of contribution you make.

• Concessional contributions – $25,000 pa
• Non-concessional contributions – $100,000 pa

Can we hyperlink concessional and non-concessional to the previous question??

The concessional contributions cap is currently $25,000 pa, unless you’re eligible to make carry-forward contributions. Carry-forward contributions allow you to carry-forward any unused concessional contributions cap in any financial year for the next five years.

The cap for non-concessional contributions is currently $100,000 pa, unless you are eligible to use the bring-forward rule. The bring-forward rule allows you to bring-forward the next three years of your annual non-concessional contributions cap into the current financial year, meaning you can contribute up to $300,000 without exceeding the cap.

From 1 July 2018 there is a 5-year carry forward of unused concessional contributions under the annual $25,000 cap.  Key features include:

• Unused concessional contributions up to the cap of $25,000 pa can be carried forward for a maximum of 5 years.
• Your total superannuation balance must be less than $500,000 as at 30 June of the previous financial year.
• The new rules apply from 1 July 2018 which means only unused cap amounts from 2018-19 and later financial years can be carried forward (the first financial year in which unused concessional contributions can be used is 2019-20).

The bring-forward rule allows you to bring forward two years of non-concessional cap therefore you can contribute a maximum non-concessional contribution of $300,000 (instead of the $100,000 annual cap).

To be eligible you must meet the following criteria:

• You must be under 65 at some point in the triggering year (there is legislation currently proposed to lift this age to under 67)
• Your total super balance at the beginning of that year must be at no greater than $1.5 million

The available amount and period of bring-forward is also determined by the value of your total superannuation balance:

• Total super balance greater than $1.6 million has no available non-concessional cap
• Total super balance between $1.5 million and $1.6 million has the standard cap of $100,000 and no bring forward period.
• Total super balance between $1.4 million and $1.5 million has a cap of $200,000 with a bring forward period of 2 years.
• Total super balance less than $1.4 million has a cap of $300,000 and a bring forward period of 3 years.
• The applicable total superannuation balance is measured as at 30 June of the previous financial year.