EOFY 2019: Superannuation and tax tips

As the end of financial year (EOFY) deadline looms, it’s time to review your superannuation activities and make the most of your super strategy before June 30, 2019.

Your superannuation is your future and the key to a comfortable and enjoyable retirement, so it pays to maximise all the tax opportunities available to you each year.

There are multiple tax factors to weigh up including personal contributions, benefits and estate planning, as well as investment considerations.

Here are the key areas of your super strategy to review before June 30:

Contribution planning

Firstly, super fund members can make up to $25,000 worth of concessional contributions in the 2018-19 financial year.

The contributions should be paid to the fund’s bank account by June 30 and any excess contributions beyond the cap will be taxed at your marginal tax rate.

Concessional contributions include Superannuation Guarantee Contributions (SGCs), employer voluntary/extra contributions, like salary sacrificing, and member taxable contributions.

Member taxable contributions come with numerous conditions like completing and signing a contribution deduction notice, so carefully review these contributions or get an expert to help.

The 2019-20 financial year is the first year when carry forward provisions come into effect, where you can carry forward unused contributions for five years, so check whether this new rule can improve your strategy.

Splitting concessional contributions with your spouse may also help you reach your superannuation goals if up to 85 per cent of your previous year’s taxable contributions can be split and your spouse meets certain age requirements.

Benefit planning

It’s best to stay on top of when you can access your super and how you want it paid out to avoid any unhelpful surprises.

The three key tests to access your super are reaching preservation age and having permanently retired; leaving an employer or permanently retiring aged between 60 and 64; or reaching 65.

Preservation ages range from:

Date of birth            Preservation age

Before 1/7/1960                  55

1/7/1960 – 30/6/1961       56

1/7/1961 – 30/6/1962       57

1/7/1962 – 30/6/1963       58

1/7/1963 – 30/6/1964       59

After 30/6/1964                  60

Superannuation benefits can be paid out in lump sum benefits, a Transition to Retirement Income Stream (TRIS) or an account-based pension (ABP).

All three options are received tax free if you are aged 60 or older. The lump sum means you withdraw a large amount or receive your entire member balance at once, while a TRIS is paid to members aged between their preservation age and 65 who don’t meet a condition of release.

The ABP, which is paid to members who have met a condition of release, has the tax benefit that the fund’s investment income is tax free.

Estate planning and investments

Who will receive your superannuation benefits in the event of your death and whether your benefits will be paid out as a pension or a lump sum are important considerations to review each year.

Check whether your death benefit nomination needs to be updated if your circumstances have changed and whether you have the right level of life insurance and income protection.

Also review the tax implications of your benefits after your death — spouses and dependent children can receive benefits tax-free however, non-spouses and non-dependent children can attract a 15 per cent tax.

When it comes to investments, it’s important for self-managed super fund (SMSF) members to check that they have an appropriate investment strategy.

There are other investment considerations to analyse: are your fund’s investments consistent with its investment strategy and are those investments valued at market value? Do you hold property that requires a market appraisal, or do you hold cryptocurrency or collectibles?

At LDB, we can help guide you through the legislative requirements and ATO and auditor expectations.

Talk to the superannuation experts

With so much to consider, you might want to engage a superannuation expert to make sure you are getting the most value out of your strategy.

LDB’s team of superannuation specialists can help, so give us a call on (03) 9875 2900 or send us information via the contact form below.