Newsletter

June 2023

June 2, 2023

Welcome to the latest edition of our client newsletter,

Qur articles cover a range of topics which we hope you will find interesting. We aim to keep you informed of changes as they happen, but we also want to provide ideas to help you live the life you want — now and in the future.

In this edition we discuss ” Your end of Financial Year Super Checklist” and provide you with information on ” Tax-deductible Superannuation Contribution Explained™ and ” Making Super downsizer contributions”.

If you would like to discuss any of the issues raised in this newsletter, please don’t hesitate to contact us.
In the meantime we hope you enjoy the read.

All the best,
Planet Wealth Pty Ltd

Planet Wealth

921, High St Road, Glen Waverley, Vic 3150

• P 1300 004 254
• E info@planetwealth.com.au
• W www.planetwealth.com.au

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Your end of financial year super checklist

With the end of financial year fast approaching, now is a good time to consider how you can use superannuation to maximise your tax benefits.
While certain contributions may be able to reduce your taxable income or see you pay less on investment earnings, there are a range of considerations. These include how much money you have in your super, whether you’re still in the accumulation phase and your age.

Contributions that could create tax benefits

1. Tax-deductible super contributions

‘You may be eligible to claim a tax deduction on after-tax super contributions you’ve made, or make, before 30 June this year.

To claim a deduction, you can notify your fund via a ‘notice of intent’ form. Your fund must lodge and acknowledge this before you file a tax return for the year you made the contributions.

Making additional contributions can be advantageous if you’ve received extra income, which would otherwise be taxed as personal income. This also applies
to the sale of any assets where the proceeds are subject to capital gains tax.

2. Government co-contributions

If you’re a low to middle-income earner and have made (or decide to make) an after-tax super contribution of $1,000 which you don’t claim a tax deduction for, you might be eligible for a government co-contribution of up to $500.

If your total income is equal to or less than $42,016 this financial year, you’ll be eligible to receive the maximum co-contribution of $500. If your income is between $42,016 and $57,016, your entitlement will reduce progressively as your income rises.

3. Spouse contributions

If you’re earning more than your partner, spouse contributions are another option
to consider.
Eligibility for the maximum $540 offset requires a minimum contribution of $3,000 and your partner’s annual income to be less than $37,000. A partial offset is also available if annual income is less than $40,000.

4. Salary sacrifice contributions

Salary sacrifice contributions are also generally taxed at 15% (or 30% if total income exceeds $250,000), which can be less than personal income tax.

If you’re in a position to set up a salary sacrifice arrangement, you may want to do this before the new financial year begins, so talk to your employer to document the arrangement.

Important things to consider

• To claim a deduction or other government concessions, contributions must be received by your fund before the financial year ends.
• Limits apply on contribution amounts, and additional tax and penalties may be incurred if you exceed contribution caps.
• The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age and meet a condition of release, such as retirement.
• The eligible age for downsizer contributions has been lowered from 60 to 55 years, enabling more Australians to contribute up to $300,000 from the sale proceeds of a home into super.!
• Superannuation guarantee payments are increasing to 11% from 1 July 2023.

Super rules can be complex, so for more information regarding what caps and limits apply, check out your myGov account, or speak to us today. Before making extra contributions, make sure you understand and are comfortable with any potential risk.

I https/www.ato.gov.au/individuals/super/growing- your-super/adding-to-your-super/downsizing- contributions-into-superannuation/
© AWM Services Pty Ltd. Current as at May 2023

Tax-deductible Superannuation Contributions Explained

Did you know you can claim a tax deduction on certain super contributions when you do your tax return?

‘Whether you’re employed, self-employed, unemployed or retired, you might be eligible to claim a tax deduction on your after-tax super contributions. After-tax super contributions are voluntary payments made into your super and don’t include compulsory superannuation guarantee or salary sacrifice contributions.

How do | make a tax-deductible super contribution?

There are various ways to make an after-tax super contribution, including using money from your salary, savings, or the proceeds from an asset sale. When you contribute these funds to your super, you can claim a tax deduction on the amount when you do your annual tax return.

What are some of the benefits?

Putting money into super and claiming it as a tax deduction may be beneficial if you receive extra income that would otherwise attract personal income tax (as this is often higher).

Similarly, if you’ve sold an asset subject to capital gains tax, you may contribute some or all of that money and claim it as a deduction. This could reduce or even eliminate the capital gains tax owed.

What do | need to do to claim a tax deduction on a super contribution?

Make an after-tax contribution to your super

While you can contribute any amount, concessional contributions are capped at $27,500 per financial year. In some cases, you can make catch-up concessional contributions, but it’s important to check because if you exceed the cap, additional tax may apply.

Lodge a form with your super fund

The next step is to lodge a notice of intent form with your super fund, which will acknowledge receipt in writing. Importantly, you shouldn’t make any withdrawals, rollovers or transfers to pension before your notice of intent form has been lodged, as this may reduce or invalidate the tax deduction. The next step is to lodge a notice of intent form with your super fund, which will acknowledge receipt in writing. Importantly, you shouldn’t make any withdrawals, rollovers or transfers to pension before your notice of intent form has been lodged, as this may reduce or invalidate the tax deduction.

Have the paperwork ready when you do your tax return

Once the financial year ends, you can prepare and lodge your tax return using the written acknowledgement from your super fund.

Are there other things that I should keep in mind?

Your age

Recent changes to super have removed the need to meet a ‘work test’ before making a personal contribution or under a salary sacrifice arrangement. However, if you are 67-74, you must meet the ‘work test’ to claim a deduction on personal super contributions.!

The ‘work test’ requirements state that you must be employed or self-employed for 40 hours over 30 consecutive days in the financial year where contributions are made or meet the work test exemption rules.

For the work test exemption, you must meet three conditions:

• You met the work test in the financial year before contributing.
• Your total super balance is less than $300,000 at the end of the previous financial year.
• You did not use the work test exemption in a previous financial year.

Contribution limits

If you’re claiming a deduction for an aftertax super contribution, the contribution will count towards your concessional contributions cap ($27,500 per year). Note that you may be eligible to contribute more if you have unused concessional contributions from previous financial years.

Importantly, other contributions also count towards the concessional contributions cap, including:

• Compulsory SG contributions
• Salary sacrifice contributions

Other contribution incentives

After-tax super contributions that you claim a tax deduction for won’t be eligible for a super co-contribution from the government. When you can access super The Government sets rules around

‘when you can access your super.

Generally, you won’t be able to access this money until you’ve reached your preservation age and retired.

Super returns aren’t guaranteed

The value of your investment in super can fluctuate. Before making extra contributions, make sure you understand the risks.

Contact us to find out about other ways you can contribute to your super.

i https://www.ato.gov.au/Individuals/Super/in-detail/ Growing-your-super/Super-contributions—100- much-can-mean-exira-tax/
© AWM Services Pty Ltd. Current as at May 2023

Making Superannuation Downsizer Contributions

If you’re over 55 and looking to boost your retirement savings, you may be eligible to make a super contribution of up to $300,000 from the sale proceeds of your primary residence

On 1 January 2023, the age when eligible Australians qualify to make downsizer contributions was reduced from 60 to 55. For those who qualify, it can be an
opportunity to top up your super balance to capture potential tax-exempt future investment returns when you turn 60 and may be eligible to commence a retirement phase income stream.

So, if you’re considering selling your home and using downsizer contributions, here’s what you’ll need to know.

Benefits of making a downsizer contribution

Super balance boost

Downsizer contributions can provide a tax- effective way to boost your super balance, especially if you haven’t had the chance to save enough funds for retirement.

Tax-free investment earnings

The earnings generated from your downsizer contribution can provide you with a taxfree source of income, assuming you have met the age requirements to move from the accumulation phase, to drawdown retirement phase.

No work test requirement

No work test or upper age limits apply to downsizer contributions, providing the flexibility to take advantage of the downsizer contribution at any time.

Concessional and nonconcessional caps don’t apply

Downsizer contributions aren’t limited by regular concessional and non-concessional contribution caps. That means you can direct up to $300,000 beyond any funds already in your super.

There is no requirement to buy a new home

If you sell your main residence and make a downsizer contribution to your super, you’re not required to buy a new home with the money you might make on the sale.

Both partners can benefit

For couples, both partners can participate in downsizer contributions, where up to $600,000 of sale proceeds may be invested into super.

No total super balance contribution restrictions

Downsizer contributions aren’t subject to the total super balance limit which restricts non-concessional contributions. This means if your balance is already above the limit, you can still make a contribution.

Rules and other considerations to be aware of

It’s important to note that while downsizer contributions are exempt from regular contribution caps, the funds will contribute towards your total super balance amount. They are also subject to the transfer balance cap (TBC).

The TBC applies when funds are moved from your super account into a retirement pension, where income generated from investments has a 0% tax rate. This amount is currently capped at $1.7 million (but is increasing on 1 July 2023 – more on this below), and any amount above, including from the downsizer contribution, will stll be taxed at the accumulation rate of 15%.
Additional considerations include:

‘You must be aged 55 or over to make a downsizer contribution.

A downsizer contribution must be made within 90 days of receiving the sale proceeds.

• The sold property must have been the primary place of residence at some point in time and have been owned by you for at least 10 years.
• The sold property must be in Australia and excludes caravans, mobile homes, and houseboats.
• A downsizer contribution form must be submitted to your super fund before or when making your contribution.
• You can’t have previously made a downsizer contribution to super.
• The maximum amount of super savings that can be transferred into a retirement pension increased to $1.7 million on 1 July 2022 and is set to increase again to $1.9 million on 1 July 2023. For some individuals however, there may be no change at all to the total amount you can transfer.
• Downsizing your home may impact your age pension eligibility as the family home is generally not considered an assessable asset when calculating entitlements.
• The costs involved in selling a property and buying another one can be considerable.

Downsizer contributions are not taxdeductible contributions.

Depending on your personal circumstances, various other rules may apply, so it’s important to speak us before making any significant decisions.
© AWM Services Pty Ltd. Current as at May 2023