Ways to help maximise your super before June 30 🌱💰
Here are some options to make the most of your superannuation over the next few weeks.
With June 30 fast approaching, now is a good reminder on a few super options to prepare for leading up to end of financial year – as well as making the most of contribution opportunities. This article covers a number of superannuation checklists that best relate to the over 60s.
If you have a pension in an SMSF, make sure you have drawn at least the minimum amount required before June 30. If that doesn’t happen, it’s as if the pension didn’t exist for the entire 2021-22 financial year. For example, the fund won’t get the special tax treatment that normally means it doesn’t have to pay tax on some of all of its investment income (rent, dividends, interest, capital gains, etc). That’s because this tax break is only provided on pensions that actually meet all the rules – including paying a minimum amount each year.
Making sure your contributions count in 2021-22 can be important for many reasons. The limits or caps on your contributions operate on a financial year basis. So if you have carefully planned your affairs so that you will, say, reach the limit on concessional contributions (contributions made by an employer or ones you make personally but claim a tax deduction) of $27,500 in 2021-22, you need all those contributions to arrive in your fund before June 30.
If you want to make contributions in 2021-22, make sure they’re paid into your fund in time. There are a few traps for the unwary here.
In an SMSF, if you’re making personal contributions via internet banking, make sure the money actually shows up in the fund’s bank account before June 30. While online transfers often feel immediate, that doesn’t always translate into an immediate addition to the receiving (SMSF’s) bank account.
If you’re running very late, it’s actually better to pay the contribution by cheque. A contribution made by cheque counts as being received as long as it’s in the SMSF trustee’s hands before midnight on June 30 and there was enough money in your personal account to cover it. It has to be banked promptly, but it’s virtually the only time a contribution appearing on your fund’s July (not June) bank statement will count as a 2021-22 contribution.
You don’t have the same flexibility with a personal contribution to a public fund. Many have cut-off dates well before June 30 – sometimes a week or more. Make sure you’re aware of these dates before assuming a deposit at the last minute will be fine.
Family trust distributions
Will you (or someone in your family) receive amounts from a family trust (known as distributions) that are counted in your 2021-22 income tax return? If so, are you planning to make a super contribution and claim a tax deduction for it to reduce the tax you pay on these distributions? That contribution needs to be made before June 30, even if you don’t know the exact amount of the distribution yet. The same applies if you’re making a contribution you intend to claim as a tax deduction for any other reason – make sure it lands in the super fund before the end of the year.
Do you have family who might benefit from government co-contributions? This is the scheme where certain people can make personal super contributions and get another 50 per cent as a top-up from the government ($500). In other words, someone meeting all the eligibility rules can contribute $1000 of their own money and the government will add another $500. To lock in this benefit for 2021-22, the personal contribution has to be in the super fund before June 30.
Are there costs you’ve paid for your SMSF personally that should actually have been paid by the SMSF? If you don’t get those reimbursed, they get treated as a contribution.
For example, John has insurance in his SMSF and paid the premium ($3000) via his personal credit card in June. If he doesn’t get his fund to pay him back, the SMSF’s income tax return will have to show that this was an expense incurred by the fund but paid by John, and in doing so he effectively made a $3000 contribution for himself. If he’s already used up his contribution limits, this will potentially cause him big problems.
Technically, there’s nothing magic about June 30 here – John just has to make sure he’s reimbursed “promptly”. But in practice, it’s actually much easier to make sure it’s all done in the same financial year. So get that done before June 30 too.
This article was first published by Meg Heffron of Heffron Consulting.
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