Prior to year-end it is worthwhile reviewing superannuation contribution as to the types of contributions that can be made and the amounts that can be paid to ensure contributions have been optimised for 2020-2021 year and also that they are within what is allowable. For information purposes we have provided details below on the Superannuation Contribution caps for 2020-21 year.
The information provided below is general information only and is not financial advice or not to be construed as financial advice. If you need assistance with this in relation to your own personal circumstances then you should consult your financial advisor for advice.
Superannuation Contributions
- Non-Concessional Contributions (NCC) Cap –$100,000 provided the individual’s total Superannuation Balance (TSB) is less than $1.6 million as at 30 June 2020.
- If under age 65 (refer note below) at the start of the financial year, then there is the ability to access the “bring-forward“ rule subject to TSB as at 30 June 2020.
Where an individual’s TSB is;
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- less than $1.4 million, the total NCC are capped at $300,000 over three years
- $1.4 million to $1.5 million, the total NCC are capped at $200,000 over two years
- $1.5 million to less than $1.6 million, the bring-forward rule is not available and the total NCCs are limited to $100,000.
- If any remaining bring-forward cap is used in 2021-2022, then the TSB must be less than $1.7 million as at 30 June 2021.
- Note – In the 2019-20 Federal Budget, the Government proposed to increase the maximum age the bring-forward rule can be triggered from under 65 at any time in the financial year to under 67 in the financial year with an effective date of 1 July 2020. The draft legislation is currently before Parliament and is not yet law.
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- Concessional Contributions (CC) Cap – $25,000 unless the individual uses the carry-forward of their unused CC cap (refer below)
Carry Forward Unused Concessional Contributions
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- From the 2019-20 year an individual’s CC cap is increased if:
- actual CCs are greater than the standard CC cap ($25,000) and
- TSB is less than $500,000 at 30 June of the previous financial year end and
- there is a balance of unused CC’s cap available from any or all of prior five years (commencing from 2018-19 year onwards)
- Example – 2018-2019 unused CC’s $16,000 and 2019-2020 unused CC’s $15,000 then subject to meeting the rest of the eligibility rules the CC’s cap limit available for 2020-2021 year would be $56,000
- From the 2019-20 year an individual’s CC cap is increased if:
- CGT cap: $1,565,000 (lifetime limit)
Reminder Note
- Contributions received by a super fund after 30 June 2021 will generally count towards the contributions cap limits for the 2021-2022 financial year even if they relate to 2020-2021 financial year (ie Jun-21 super contribution received by the fund Jul-21 will count towards the 2021-2022 cap limits). If this occurs then the super contributions caps for the next year (2021-2022) are affected. This is particularly important to keep in mind for employer Superannuation Guarantee contributions as employers have until 28 July 2021 to make contributions for the quarter ending 30 June 2021.
- Check that any contributions made to super funds do no breach cap limits.
- Contributions not made by the member themselves (excluding spouse contributions and non-employer contributions made for a child) are treated as concessional contributions and count towards the concessional contributions cap. However, contributions made by an employer from the take-home pay of the client are considered by the ATO to be non-concessional contributions.
- Contribution caps will be indexed on the 1 July 2021. Triggering the bring forward provisions in the next financial year (instead of this financial year) may be a more suitable strategy allowing you to contribute more capital into your superannuation fund in the following year. (CC cap will increase from $25,000 to $27,500 and the NCC cap will increase from $100,000 to $110,000 from the 2021-2022 financial year).
- Due to the indexation of the general transfer balance cap and the NCC cap, the TSB thresholds outlined in the table above ($1.6m) will increase to $1.7m for the 2021-2022 financial year (refer below).
ATO: Indexation of the super contribution caps
Considerations for clients turning 65
If you are turning 65 after 1 July 2020, under the current law for 2020-2021, this is the last year in which you can trigger the bring-forward rule which allowing NCC’s of up to a maximum of $300,000 over three years assuming (1) you are below the TSB limits and (2) you haven’t already triggered the three-year cap in the previous two financial years (refer notes above).
Note – the law has been changed with effect from 1 July 2020 to increase the age at which the work test applies. The work test (or work test exemption) applies for contributions made from age 67 (this was from age 65 prior to 1 July 2020) and as mentioned earlier the bring forward rule age is proposed to increase from age 65 to 67 effective 1 July 2020.
Total Superannuation Balance
From 1 July 2017, your TSB determines the eligibility for the superannuation cap measures outlined in the table below. TSB is measured as at 30 June each year to determine eligibility for the following financial year.
| Eligibility | TSB Thresholds |
| Non-concessional contributions cap and the bring-forward rule | $1,600,000 (member TSB) |
| Carry forward of unused concessional contributions cap | $ 500,000 (member TSB) |
| Government co-contribution | $1,600,000 (member TSB) |
| Spouse contribution tax offset | $1,600,000 (member TSB) |
| Exemption from work test in the year following retirement | $ 300,000 (member TSB) |
If your TSB is approaching the relevant threshold, you should consider strategies to minimise your accumulation and/or pension balances as at 30 June. For example, consider splitting CC’s with a spouse or reviewing the timing of contributions or withdrawals.
Refer ATO: Total Superannuation Balance
Personal Super Contributions – Deduction Notices
If you are intending to claim a deduction for personal super contributions you must lodge a deduction notice (using the approved form) with the fund before the earlier of:
- the day they lodge their tax return for the year in which the contribution was made or
- the end of the financial year after the financial year in which the contribution was made.
Key information on how to claim or vary a deduction for contributions made to the Macquarie Superannuation Plan is contained in the Guide to completing the Deduction Notice for Personal Superannuation Contributions.
Reminder
- Where you roll over or withdraw a part of your super benefit before a deduction notice has been lodged, the amount of the personal contribution that can be claimed as a deduction will be reduced. This is because part of the contribution is considered to be included in the rollover/withdrawal amount.
- Where a client uses part of their super benefit to commence a pension, a deduction notice cannot be lodged after the pension commences for contributions made prior to the pension commencing.
- A common mistake involves contributions made for self-employed clients being incorrectly classified as employer contributions. Any contributions incorrectly classified as an employer contribution will need to be reclassified as a personal contribution before a deduction notice can be accepted. It is therefore important to ensure that contributions are classified correctly.
- Be mindful of the concessional contribution cap ($25,000 for the 2020-21 financial year) as the excess concessional contribution amount will incur additional tax and will count towards the client’s non-concessional contribution (unless you make an election to release the funds).
Further help & assistance can be found at
- ATO: Deduction for personal super contributions
- TR 2010/1 Income tax: superannuation contributions (example 10)
Salary Sacrifice Strategies – Are They Effective?
Review current and planned salary sacrifice contributions to ensure they are or will be within the CC’s cap. Be mindful of employer Superannuation Guarantee contributions relating to the 2019-20 year that may have been received by your superannuation fund after 30 June 2020 (these contributions will count towards your CC’s cap for 2020-2021 not 2019-2020.
Also, review your salary sacrifice arrangements for the 2021-22 financial year to ensure an “effective salary sacrifice arrangement” is in place ahead of your client earning the right to certain benefits.
Further help & assistance can be found at
TR 2001/10 Income tax: fringe benefits tax & super guarantee: salary sacrifice arrangements
Spouse Contribution Tax Offset Eligibility
If your spouse has assessable income, reportable fringe benefits and reportable employer contributions of less than $40,000 then;
- You could consider making a NCC to your spouse’s super fund.
- Tax Offset is calculated as 18 per cent of the contribution amount up to a maximum of $540 where your spouse’s income is below $37,000. A reduced Tax Offset may be available where income is between $37,000 and $40,000.
Reminder
No Tax Offset will be available where your spouse has excess NCC’s or their TSB as at 30 June 2020 exceeds $1.6m (nb 30 June 2021 = $1.7m).
Further help & assistance can be found at
Government Co-Contribution Eligibility
If your assessable income, reportable fringe benefits and reportable employer super contributions less any deductions for carrying on a business is less than $54,837 then;
- You could consider making a NCC of up to $1,000 to your super fund and.
- The Government will provide a co-contribution at a maximum of 50% of this contribution up to a maximum of $500 for income below $39,837.
Reminder
- The Government Co-Contribution will not be available where you have excess NCC’s or your TSB exceeds $1.6m as at 30 June 2020.
- Eligibility requires that a minimum of 10% of assessable income relates to income from employment or carrying on a business.
Further help & assistance can be found at
Spouse Contribution Splitting
You are able to split up to 85% of CC’s (up to the CC cap limit) made during any financial year with your spouse, provided your spouse is not over age 65 or has reached their preservation age and retired.
This includes CC’s which utilises any carry-forward unused concessional contribution cap.
The application to split contributions must generally be made before the end of the financial year immediately after the financial year in which the contribution was made.
Reminder
Any split CC’s to a spouse counts towards the CC’s cap of the person who made the contributions and not the cap of the spouse who receives the split contributions.
Further help & assistance can be found at
