CONTRIBUTIONS

Non-concessional contributions cap

Current law

You can make non-concessional contributions of up to $100,000 if you qualify and have a total superannuation balance of less than $1.6 million at the prior 30 June.

If you are under 65, it is possible to access the ‘bring-forward’ rule and make non-concessional contributions of up to $300,000 over a fixed three-year period, provided your total superannuation balance is no more than $1.4 million at the prior 30 June. If your total superannuation balance is between $1.4 and $1.5 million you can make non-concessional contributions of up to $200,000 over a two-year fixed period and if your total super balance is between $1.5 and $1.6 million, your non-concessional contribution is limited to the standard annual limit of $100,000.

Labor policy

The standard annual non-concessional contribution cap of $100,000 will be reduced to $75,000. The ‘bring-forward’ rule will then change to allow a one-off (after-tax) contribution of $225,000 for an individual, or up to $450,000 for a couple to a maximum of $225,000 each.

The cut in the cap reduces the ability to make a ‘one-off’ contribution to super, which can come from the proceeds of selling investments, an inheritance, a redundancy payment or some other means.

Non-concessional contributions and access to the bring forward rule will continue to be determined by your total superannuation balance which is measured as at 30 June in the previous financial year.

Concessional contribution cap

Current law

The concessional cap for the 2018/19 financial year is $25,000 for an individual. There is no higher cap for older Australians. The cap is indexed and increased in amounts of $2,500. The cap will not increase for the 2019/20 financial year and will remain at $25,000.

Labor policy

Labor has not announced any changes to the concessional cap, however, it has announced changes to the catch-up concessional cap rules, refer below.

Tax deductions for personal superannuation contributions

Current law

You can claim a tax deduction for personal superannuation contributions providing you have notified the fund of your intention and the fund has acknowledged your notice in writing. The maximum amount for personal superannuation contributions, including any employer or salary sacrifice contributions, is $25,000 without incurring a tax penalty.

As an example, if your salary for the financial year is $100,000 your employer would be required to make a 9.5% super guarantee contribution of $9,500, that would allow you to make a personal tax-deductible contribution of up to $15,500 ($25,000 – $9,500).

Labor policy

Tax deductions for personal superannuation contributions will be more restricted and is likely to revert to the previous rules. However, more detail of the announcement is required to work out who may be impacted by any change. The previous rules allowed a deduction for personal contributions if less than 10% of your total adjusted taxable income came from employment sources.

Catch-up concessional contributions

Current law

You may be eligible to claim personal ‘catch-up’ concessional contributions if you meet certain conditions. Whilst the measure started in the current 2018/19 financial year, the first year that a person can apply any ‘catch up’ amount is the 2019/20 financial year.

The ‘catch up’ contribution is the difference between concessional contributions you make plus those that are made for you and your annual concessional contributions cap of $25,000. You can carry forward the shortfall for up to five years and can claim a personal tax deduction up to the catch-up amount if your total superannuation balance as at 30 June in the previous financial year is below $500,000.

As an example, if you earnt $100,000 for the 2018/19 financial year and your employer contributed the compulsory super guarantee contribution of $9,500 (9.5% of $100,000) you would have an unused catch-up concessional contribution of $15,500 ($25,000 - $9,500) which you can carry forward for the next five years.

Assuming your total super balance at 30 June 2019 was less than $500,000, your concessional contributions cap for 2019/20 would be $40,500 (i.e. the standard $25,000 concessional contributions cap for the income year plus the carried forward amount of $15,500 from the previous income year).

Labor policy

Catch up contributions will be abolished as they are considered to provide an unfair advantage to upper income earners.

Division 293 high-income super contribution threshold

Current law

If your adjusted taxable income exceeds $250,000, you are required to pay an addition 15% tax on concessional contributions up to the standard cap amount of $25,000.

This means that if you have an adjusted income of at least $250,000 it will trigger an additional 15% tax (which means a total tax rate of 30% once you factor in the 15% contributions tax deducted by your super fund) on any concessional contributions within the $25,000 cap that are in excess of the threshold.

As an example, if you had an adjusted taxable income of $275,000 and your employer contributes $25,000 to your super fund, you would end up with an additional tax bill of $3,750 ($25,000 x 15%). However, if your adjusted taxable income was $260,000 and concessional contributions of $25,000 were made to your fund then only $10,000 would be taxed at the additional 15% ($1,500).

Labor policy

The high-income superannuation contribution threshold will be reduced to $200,000 from the current $250,000 threshold. Consequently, this will affect a greater number of individuals.

SUPERANNUATION GUARANTEE

$450 superannuation guarantee threshold to be phased out

Current law

Super guarantee is not payable by an employer for employees who earn up to $450 in a calendar month.

Labor policy

The $450 monthly threshold is to be progressively reduced in increments of up to $100 each financial year between 2020 and 2024. The effect of this change is intended to benefit low income earners, casual employees and those in part-time employment.

Mark Ellem, SuperConcepts