Overview
As 30 June approaches, now is the time to make sure you have taken advantage of the benefits of the concessionally-taxed superannuation system. In the past few years, there have been positive changes to super that help Australians save for their retirement:
• Abolition of the work test for non-concessional contributions
• Reduction in the minimum qualifying age for downsizer contributions
• Increase contributions made under superannuation guarantee
• Increase the amount available under the First Home Savers Super Scheme.
Whilst there has been much noise about the government’s detrimental tinkering with our compulsory savings system, superannuation is still the most tax effective retirement investment vehicle for Australians.
Below is a list of things to consider.
Contributions
There are two types of contributions that can be made to super, tax-deductible concessional contributions and non-deductible non-concessional contributions. If you are an employee, your employer may claim a tax deduction for contributions made for you.
You may be eligible to claim a tax deduction for personal concessional contributions you make to your super. For personal concessional contributions, you will need to send a ‘Notice of Intent’ to your fund prior to lodging your personal tax return for the amount you intend to claim. It is important to note to make sure the contribution is received by the fund on or before 30 June 2025.
Concessional Contributions
The standard concessional contribution cap of $30,000 for the current financial year is taxed at 15%. Any concessional contributions more than this cap are taxed at your personal rates. You can have the excess refunded to you, or leave it in the fund and have it counted against your non-concessional contribution cap. However, it is possible to have a higher concessional contributions cap if the amount you had in super on 30 June 2024 was no more than $500,000. If you qualify, then your cap will include the unused amount of your concessional contributions since 1 July 2019. These contributions are called your ‘carry forward concessional contributions.’ They ‘roll forward’ every 5 years; so those contributions accrued but unused in the 2019/20 financial years need to be utilised this financial year, or they will be lost.
Whilst the work test was abolished for non-concessional contributions (see below), unfortunately the legislation did not abolish the work test entirely. If you wish to make a personal contribution for which you intend to claim a tax deduction and you are aged between 67 and 75, you are still required to meet the requirements of the work test.
Remember the work test is defined as working at least 40 hours in a period of 30 consecutive days during the financial year in which you wish to make super contributions.
Non-concessional Contributions
There are also many personal non-concessional contributions opportunities that can be utilised. For example, they include downsizer contributions if you sell your main residence, contributions under the small business Capital Gains Tax (CGT) retirement concession, contributions made for your spouse, or even those made for a child under 18 years of age. Low-income earners may qualify for the government co-contribution and low-income superannuation tax offset, which also fall in this category.
There is a standard cap of $120,000 that applies for the 2024/25 financial year to non-concessional contributions if the total amount you had in superannuation on 30 June 2024, which is called your Total Super Balance (TSB), was no more than $1.9 million. If your Total Super Balance is greater than $1.9 million, a penalty tax applies to your non-concessional contributions, and you may need to withdraw the excess from super. If you leave the excess amount in superannuation, it is taxed at the top Marginal Tax Rate (MTR) of 45%.
For anyone under 75 on 1 July 2024, it may be possible to access the bring-forward rule, which allows you to bring forward up to the next two years non-concessional contributions in the current financial year (i.e. $360,000 in total) if your TSB was no more than $1.66 million on 30 June 2024. This assumes you have not triggered the bring-forward in either of the previous 2 financial years.
If it is between $1.66 million and less than $1.78 million, then you may qualify to bring forward up to one year’s standard cap in addition to the current financial year (so $240,000 in total), and if you have a TSB between $1.78 million but less than $1.9 million, then you have the general non-concessional cap for that year ($120,000).
It is worth noting the General Transfer Balance Cap increases from $1.9m to $2.0m om 1 July 2025.
Downsizer Contributions
Making downsizer contributions have become increasingly popular since commencing in July 2018. Until 31 December 2021, anyone 60 or older could make a downsizer contribution of up to $300,000 after they or their partner sold their main residence owned for at least 10 years (but not necessarily used as their main residence for the entirety of the period). From 1 January 2023, the qualifying age was lowered to 55.
For those eligible, there is no need to meet the contributions work test, no upper age limit and the contribution is not subject to the prohibition on making additional non-concessional contributions where your TSB is more than $1.9 million.
Salary Sacrifice Contributions
Salary sacrifice is a strategy where you ‘sacrifice’ salary and wages for the equivalent amount contributed to super on a pre-tax basis, swapping higher taxed salary from lower taxed super contributions.
If you have one in place, review your salary sacrifice agreement to ensure you have maximised your salary sacrifice superannuation contributions for the 2024/25 financial year.
Salary sacrifice contributions are usually worked out with your employer at the start of a financial year, or when commencing new employment, but it is possible to vary it throughout the year.
However, even with the extra amount contributed, the contributed amount may still be less than the concessional cap of $30,000 (for 2024/25).
Personal tax deductions are available for super contributions, so you can increase your concessional contributions from personal savings up to the cap and claim it as a tax deduction.
Superannuation Guarantee Contribution
Do not forget that Superannuation Guarantee (SG) contributions made by your employer count against your concessional contributions cap. As these contributions are compulsory, you will need to take them into account with any contributions made under a salary sacrifice agreement to avoid any excess that may arise. From 1 July 2025, your salary sacrifice agreement will need to consider the Superannuation Guarantee rate will increase from 11.5% to 12%.
Spouse Contributions
Spouse contributions can be an important addition to the superannuation savings of your spouse. As spouse contributions are treated as non-concessional contributions and not tax-deductible, they are counted against your spouse’s non-concessional contributions cap. However, if your spouse qualifies as a low-income earning spouse with an adjusted taxable income of less than $37,000, the spouse contribution can qualify for a tax offset for you as the contributing spouse. If you make a spouse contribution of at least $3,000, you may qualify for a tax offset of up to $540.
Spouse Splitting Contributions
You can split up to 85% of your concessional contributions (including any unused carry forward concessional contributions, subject to your TSB) from a prior year with your spouse, if they are less than their preservation age, or aged between their preservation age and 65 years, and not retired. This may be a strategy where your spouse has a low super balance or is closer to retirement.
Government Co-contribution
If you are under age 71, engaged in employment and your total income is less than $45,400 (for 2024/25), the government will co-contribute 50 cents for every $1 of any non-concessional contributions that you make, up to a maximum of $500. This may be a useful strategy for low income working spouses or those working part-time.
Recently Retired Super Contribution
There is a special concession for contributions if you are between 67 and less than 75 years of age in the year after you have ceased working. If you have a TSB of no more than $300,000 on 30 June 2023 and ceased work that financial year, you may be entitled to make concessional contributions to super without the need to meet the work test this financial year. Of course, you can make non-concessional contributions in any year after you have ceased work if you qualify, up to the time you reach age 75 and there is no need to meet the work test.
Low Income Super Tax Offset
Whilst not technically a contribution, if you earn up to $37,000 a year, you may be eligible to receive a low-income super tax offset (LISTO) payment of up to $500.
The LISTO is 15% of the concessional contributions you or your employer pays into your super fund up to a maximum of $500. This is designed to ensure low-income earners do not pay more tax on their super contributions than on their take-home pay.
You do not need to do anything to receive a LISTO payment – it is-automatically calculated and paid into your super account.
Small Business CGT Concessions
The small business CGT concessions (if accessible) give you the opportunity to contribute additional amounts to superannuation outside of the restrictive contribution cap rules.
In fact, your TSB does not preclude you from making small business CGT contributions of up to $1,780,000 to super. Even better, the contribution will be considered a tax-free component of any pension commenced, subject to your Transfer Balance Cap (TBC).
This is a complex area of tax and specialist advice should be sought to ensure the criteria are met.
Keeping track of contributions
During the financial year, it is important to keep track of the amount of concessional and non-contributions made to super, to see whether any excess is likely to occur, and penalties applied. For concessional contributions, it is important to see what your employer may have contributed, including anything made under a salary sacrifice agreement.
For non-concessional contributions, you should check the amount contributed this financial year and the last two years in case the ‘bring forward rule’ has been triggered. And be aware any spouse contributions you may have made count towards your spouse’s non-concessional contribution cap, which may be limited by their TSB as of 30 June 2024.
Consider commencing an income stream before 30 June
If the fund is looking to realise assets before 30 June, consideration should be given to commencing an income stream. A fund may be exempt from tax when paying funding pension liabilities, so tax mitigation may be a sound strategy. If a member commences an income stream in June, they do not have to draw a pro-rata minimum payment. Remember, you cannot backdate pensions, so the decision to commence a pension must be made prior to the income stream commencing.
Income streams are tax free if you are 60 or over, so potentially delay payments until on or after your 60th birthday, even though the pension may have commenced earlier in the financial year.
Make sure you draw the correct minimum
Make sure you draw the correct minimum in the current financial year. The drawdown minimums for Account Based Pensions (ABP) are as follows:
| Age | % of Account Balance (2023 – 24) |
| 55-64 | 4.00 |
| 65-74 | 5.00 |
| 75-79 | 6.00 |
| 80-84 | 7.00 |
| 85-89 | 9.00 |
| 90-94 | 11.00 |
| 95+ | 14.00 |
There is no maximum annual limit applicable to your ABP unless you are under age 65, still working and drawing a TRIS pension from your super fund, in which case the maximum annual limit is 10%.
Underpayment of pensions and income streams can lead to several compliance issues if the minimum pension has not been paid. This time of year, is a good time to ensure you will withdraw at least the minimum pension amount from your SMSF by 30 June 2025. It will ensure that any income earned by the fund on any investments supporting the pension will be tax-exempt and not taxed at 15%.
What does Neo Super provide?
We are an innovative end-to-end SMSF service provider specialising in:
• SMSF administration and compliance
• Documentation services, including fund establishment, borrowing arrangements and pension documentation
• White label documentation and services for Intermediaries such as accountants and financial planners
• SMSF technical support, education, and training.
Further Information
For other service requirements, please contact our office at neo@neo-super.com.au or 1300 083 428.
