Most people rarely fiddle with their superannuation. They just forget about it and leave it there to take care of itself. However, there are rafts of changes that are rolled out almost every year by the Australian Taxation Office and if you only gave your super fund a second look, you could discover lots of superannuation incentives and savings that you could leverage in order to maximize on your retirement nest egg.
There were changes that were rolled out on July 1 2017 that you can maximize on this year. With just over 2 months left before tax time, here is a refresher of some of the superannuation changes and incentives that you should train your eyes on this financial year:-
Changes in Personal Super Contributions
Australian employees are now able to access tax deductible personal contributions. Before, an employee was only eligible for this entitlement if less than 10% of their income came from their salary and wages. However, the 10% maximum rule has now been scrapped and employees don’t have to meet this provision to claim deductions on their contributions. With the new rules, most Australian employees now have the room for topping up on concessional contributions in order to attain their caps.
It is important to keep in mind that the eligibility rules are still applicable so you will need to review these when taking advantage of this entitlement. The Australian Taxation Office has also fixed the concessional contributions cap at $25,000. The good news is that even if you are not able to meet the caps at this time, the ATO allows you to carry forward any unused caps for up to 5 years. This provides for greater flexibility for employees to meet their super obligations. Over a period of 5 years, you will have a cumulative superannuation contributions cap of $125,000 and the flexibility to make a contribution when you have the funds. You will not be time-barred simply because you missed your cap in a particular year.
A Tax Offset for Spousal Contributions
If you are making contributions into your spouse’s superannuation account and you wish to claim the associated tax offsets for the contributions, you can now benefit from the spouse income threshold increase from $10,800 to $37,000.
Prior to 1 July 2017, it was possible for the contributor (to the spouse’s super fund account) to claim a maximum tax offset of $540 for contributions made provided that the total in your spouse’s assessable income, reportable employer super contributions and the total reportable fringe benefits amounted to $10,800 or less.
The tax offset would then gradually taper off and was totally wiped off if this total amounts to $13,800 when the contributor was no longer eligible.
Under the new rules that took effect from 1 July 2017, the spousal income threshold for eligibility was increased to $37,000 from the previous $10,800. Now more contributors will be eligible for the $540 tax offset. However, this amount will reduce gradually and will be totally wiped off when the spouse’s income threshold hits $40,000 when the contributor will no longer be eligible for a tax offset. Talk to an accountant Melbourne tax professional to advise you on any caveats that may apply under this new provision.
Tax Incentives for Low Income Earners
If your taxable income is less than $37,000, you could be eligible for the Low Income Superannuation Tax Offset (LISTO). Under LISTO, your superannuation taxes must be less than the taxes that you pay on your earnings. If your income lies in this bracket and you make pre-tax contributions, you will be eligible to receive a 15% on the concessional contributions. The maximum LISTO that you can receive in a financial year is $500 while the minimum is $10. One of the best features about this incentive is that it is calculated automatically from the information provided by the superannuation fund so you don’t have to grapple with filing tedious tax claims.
High Income Earners and Superannuation in 2018
While low income earners are getting lots of super goodies in 2018, there aren’t any incentives for high income earners. Instead, the Australian Taxation Office has lowered the threshold for the Division 293 tax from $300,000 in the previous financial year to $250,000 in this financial year. The tax of 15% will apply between the lesser of your concessional super contributions and the excess of your income plus your concessional contributions if they amount to more than $250,000.
That winds up our refresher on some of the super changes that you can leverage in 2018. If you need a better understanding of these changes and how you can make the most of them to boost your superannuation balance, talk to a professional accounting firm Melbourne practice for some professional financial advice.