With the end of the financial year fast approaching, it’s time to undertake a review of your superannuation to ensure that you have maximised your tax and retirement benefits for the FY2023-24 year.
What should you be considering in terms of superannuation prior to 30 June 2024?
1. Maximise super contributions
Ensure that you have maximised your annual concessional (tax deductible) and non-concessional (undeducted or after-tax) super contributions. The following tables summarise the contribution caps for the current financial year and the 2024-25 year.
Concessional contributions
| Age | 2023-24 | 2024-25 |
| Under 75 | $27,500 | $30,000 |
- This cap is inclusive of any 11% compulsory employer contributions made on your behalf (note, set to increase to 11.5% from 1 July 2024).
- Those earning more than $250,000 will pay an additional 15% contributions tax on their concessional contributions.
- If you are age 67 and over, you need to satisfy a work test of gainful (paid) employment of at least 40 hours in a consecutive 30-day period during the financial year in order to be eligible to make personal concessional contributions to superannuation.
- If you are over age 75, only mandated or compulsory super guarantee contributions are permitted.
Non-concessional contributions
| Age | 2023-24 | 2024-25 |
| Under 75 | $110,000 or 330,000 brought forward over 3 years | $120,000 or 360,000 brought forward over 3 years |
- A non-concessional contribution of $330,000 brought forward over 3 years would only be applicable for those people that have not exceeded their annual non-concessional contribution cap of $110,000 in the prior 2 financial years.
- If you are over age 75, non-concessional contributions are not permitted.
- Individuals with total superannuation balances of $1.9m or more on 1 July 2023 are not eligible to make non-concessional contributions to superannuation this financial year.
- Individuals aged 67 to 74 years with total superannuation balances below $300,000 can make voluntary contributions to their superannuation for 12 months from the end of the financial year in which they last met the work test.
Note, your super contribution will not be counted for this financial year unless the payment is received by your super fund prior to 30 June 2024. So, plan to make final contributions by 25 June 2024 at the latest.
2. Review your salary sacrifice agreement
Review your salary sacrifice agreement to ensure that you have maximised your salary sacrifice superannuation contributions for the 2023-24 financial year. If you do not have an agreement in place, then consider establishing an agreement with your employer for the 2024-25 financial year. From 1 July 2024, your salary sacrifice agreement will need to take into account that the super guarantee rate will increase from 11% to 11.5%.
3. Personal concessional contributions for employees and self-employed
Those self-employed, or only receiving investment income should consider making a personal concessional super contribution to reduce their taxable income. Employees are also eligible to make personal concessional contributions in addition to contributions made on their behalf by their employer, provided their total concessional contributions from all sources (including super guarantee) does not exceed $27,500.
If you are eligible to make a concessional contribution in which you are able to claim a tax deduction, then you need to ensure that you have notified your super fund in writing of your intention to claim a tax deduction and you should also ensure that you receive an acknowledgment of your intention from your super fund. Without the notice and acknowledgment, your claim for a tax deduction for your personal contributions will be invalid.
4. Carry-forward your concessional contributions cap
You can roll forward any unused concessional contributions cap for five years (after which they expire). So, if you don’t use the full amount of your concessional contributions cap in any year, you can always carry-forward the unused amount and take advantage of it up to five years later. This is provided your total super balance is less than $500,000 on 30 June of the previous financial year.
The 2018-19 year was the first financial year where you can access unused concessional contributions. So, if you have less than $500,000 in superannuation as at 1 July 2023 and have never made any concessional contributions since 1 July 2018, you may be eligible to make a concessional contribution of up $157,500 in the 2023-24 year.
For those on a high taxable income, this can be a useful strategy to offset this income provided they have unused cap available and are eligible to make the contribution.
5. Split your concessional contributions with your spouse
You can split up to 85% of your concessional contributions (including any unused carry forward concessional contributions) from a prior year with your spouse as long as they’re under their preservation age, or under 65. This may be a strategy where your spouse has a low super balance (must be less than $500,000 before the start of the financial year) or is closer to retirement.
Contribution splitting can only be done after the end of a financial year.
6. Make a “downsizer” contribution
If you are over age 55 and have sold your home, you may be eligible to make a once-off contribution of up to $300,000 (or $600,000 per couple).
For those eligible, there is no need to meet the contributions work test and the contribution is not subject to the prohibition on making additional non-concessional contributions where your total super balance is more than $1.9 million and there is no upper age limit restriction.
7. Make a spouse super contribution
You may be entitled to an income tax offset of up to $540 for superannuation contributions for the benefit of a lower income (under $40,000) or non-working spouse who is under age 75.
8. Access the Government co-contribution of up to $500
If you are under age 71, engaged in employment and your total income is less than $58,445, the government will co-contribute 50 cents for every $1 of any non-concessional (undeducted) super contributions that you make, up to a maximum of $500. This may be a useful strategy for low income working spouses or adult children working part-time.
9. Make a super contribution to save for your first home
Under the First Home Super Saver Scheme, voluntary contributions to your super fund may be withdrawn to help buy or build your first home. Under the scheme, you can withdraw up to $15,000 of eligible contributions made over a financial year or up to $50,000 in total for all years, plus an amount that represents deemed earnings. Non-concessional contributions can be withdrawn tax free. Concessional contributions and total earnings will be taxed at marginal tax rates with a tax offset of 30%.
10. Consider starting a pension from superannuation
If you are over age 55, consider commencing a pension from your super fund. Under the current super rules, anyone who has reached “preservation age” (55 for those born before 1 July 1960 and 60 for those born after 1 July 1964), can start a “transition to retirement income stream” (TRIS) and draw up to a maximum of 10% of their account balance each year. This is irrespective of whether they continue to work or not. Many use this strategy to reduce their personal tax but more importantly, increase their contributions to superannuation whilst supplementing their reduced take-home pay with their pension withdrawal.
Alternatively, if you are over age 65, or if you are under age 65, but have retired since commencing the TRIS, or if you are between age 60 and 65 and changed jobs after age 60, then you may convert your TRIS to a “retirement phase pension”. The earnings on super funds paying retirement phase pensions are tax free up to the pension transfer balance cap set at $1.9 million.
11. Draw your minimum pension before year end
If you are already drawing a superannuation pension, please ensure that your fund has paid you the minimum pension before 30 June 2024. The minimum pension for the year is based on a percentage of your fund member balance as at 1 July 2023, or, if you started your pension during the year, it is based on pro-rata amount. The minimum pension percentage factor for the 2023-24 year is as follows:
| Age | % of Account Balance (2023 – 24) |
|
| 55-64 | 4.00 | |
| 65-74 | 5.00 | |
| 75-79 | 6.00 | |
| 80-84 | 7.00 | |
| 85-89 | 9.00 | |
| 90-94 | 11.00 | |
| 95+ | 14.00 |
There is no maximum annual limit to your account-based pension, unless you are under age 65, still working and drawing a TRIS pension from your super fund, in which case the maximum annual limit is 10%.
12. Thinking about setting up an SMSF before year end?
If you are planning to set up an SMSF before year end, it may be better to defer the set up until after 30 June 2024, so as to avoid the fixed annual SMSF compliance costs that will apply regardless of how long the SMSF has been in operation.
13. Self-managed Superannuation Fund Checklist
- Obtain updated and independent valuations for all assets including unlisted assets and real property (residential and commercial).
- Review and ensure related party transactions are made on arm’s length terms.
- Review and if necessary, update the investment strategy.
- Appoint an auditor no later than 45 days before the lodgement of the annual return.
- New SMSFs commenced in the 2022-23 year need to lodge their annual return by 28 February 2024.
- All Transfer Balance Account Reports (TBAR) events to be reported by 28th day after the end of the quarter.
If you wish to discuss any of the above in more detail, please contact me.
Important information
This publication has been prepared to provide you with general information only. It is not intended to take the place of if professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances.