With the new financial year well underway and the 1st quarter super contributions due for payment by 28 October 2015, are you maximising your superannuation cap limits or contributing too much for your staff?
As super contributions have annual limits, care must be taken to ensure these caps are not exceeded and penalty taxes are imposed.
(before tax contributions)
|2015/16 financial year:
< 50 years old as at 30 June 2015
|2015/16 financial year:
≥ 50 years old as at 30 June 2015
|Excess Contributions Tax on amounts in excess of the cap||Excess amount over your cap will be added to your assessable income and taxed at your marginal tax rate||49% for amounts over $180,000. Contributions over $180,000 may be withdrawn along with any associated earnings. The earnings would then be taxed at your marginal tax rate|
Tips & traps
- “Bring Forward” provisions
You are able to bring forward the next 2 years of non-concessional contributions into this year to a maximum total of $540,000.
- Superannuation guarantee & salary sacrifice contributions
Concessional contributions include any contributions made by your employer such as the 9.5% superannuation guarantee contributions and salary sacrifice contributions.
- Superannuation outside my SMSF
It is the total of your concessional contributions made to all superannuation funds which is counted against your concessional contribution cap.
- Work test and contributions for persons aged 65 to 74* years of age
If you are aged 65 or more at the time of the contribution, the work test must be met prior to making the contribution. The work test requires that a member has been gainfully employed for at least 40 hours in 30 consecutive days in the financial year. (*Contributions may be accepted up to 28 days after month in which member turns 75.)
- Triggering the “bring forward” provisions before 1 July 2014
If you triggered the “bring forward” provisions on or before 30 June 2014, then your total non-concessional contributions cap remains at $450,000 (and not $540,000).
- Turning age 65 in year of triggering “bring forward” provisions
If you are aged 64 or under on 1 July 2015, then you can take advantage of the “bring forward”’ provisions this year and contribute up to $540,000 (before turning 65), assuming you have not previously triggered a “bring forward” that covers this financial year.
Salary sacrifice agreements
When your salary is paid in the form of extra super contributions, this is known as salary sacrifice. The reason why some individuals choose this is so their assessable income is reduced and less tax is paid. For a salary sacrifice agreement to be effective, it must be entered into before the employee has earned the monies (ie. it must be made prospectively).
Bonus payments paid into super
If you’d like your performance bonus paid into your super fund (as opposed to paying to you as a salary), the arrangement must be made with your employer prior to you meeting the conditions of receiving the bonus. Similarly, any Christmas bonus can also be paid into super provided this is agreed upon before the decision to pay the bonus is made.
If you have any queries about this information, please don’t hesitate to contact us.
*Correct as of September 2015
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.