News: Federal Budget 2017-18 Contribution Proposals
From 01/07/2017, first-home buyers will be able to use voluntary contributions to their existing superannuation funds to save for a house deposit. Contributions and earnings will be taxed at 15%, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less a 30% tax offset. Contributions will be limited to $30,000 per person in total and $15,000 per year. Both members of a couple can take advantage of the scheme.
Non-concessional contributions can also be made but will not benefit from the tax concessions apart from earnings being taxed at 15%.
Contribution of home sale proceeds into super
Australians over the age of 65 will each be able to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.
These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process.
Superannuation guarantee contributions
Superannuation guarantee (SG) contributions are compulsory employer contributions. Generally, employers have to pay super for an employee if they’re 18 years or over and are paid $450 or more (before tax) a month. It doesn’t matter if you’re full-time, part-time, casual or a temporary Australian resident.
If you’re under 18, you must meet these conditions and work at least 30 hours per week to be entitled to the super guarantee. If you’re paid under a contract for your hours worked, your employer must also pay you a super guarantee.
Employers must pay a minimum of 9.5% of your earnings each quarter in super. These contributions are taxed 15% in the super fund.
Employers should be aware that the penalties for non-payment are quite substantial.
Employers can access more information at the ATO website here.
Employees, find more information at the ATO website here.
Salary sacrifice contributions
You can ask your employer to have some of your salary or wages paid into a super fund, instead of paid to you and taxed at marginal rates. This may have advantages as the standard 15% tax on super may be less than the tax you pay on earnings. These contributions are included in the Concessional Contribution caps.
The ATO provides useful information about these caps.
Government super co-contributions
If you’re a low or middle-income earner, the government will pay contributions into your super account when personal super contributions are also being made.
You may be eligible for the co-contribution if:
- you make an eligible personal super contribution by 30 June each year
- your total income is less than the higher income threshold of $51,813 (2017/2018)
- 10% or more of your total income is from eligible employment, running a business or a combination of both
- you are younger than 71 at the end of the financial year
- you don’t hold a temporary resident visa at any time during the financial year
- you lodge your income tax return for the relevant income year.
From 1 July 2017, in addition to the above requirements, you:
- must have a total superannuation balance less than the transfer balance cap ($1.6 million for the 2017-18 financial year) at the end of 30 June of the previous financial year, and
- must not have contributed more than your non-concessional contributions cap.
The ATO website provides a calculator to help you work out if you’re eligible to receive a government super co-contribution.
You can increase your super in retirement by adding your own contributions to your account. Personal contributions are non-concessional or ‘after tax’, unless a tax deduction has been claimed for them. Personal contributions made if you’re self-employed and claimed as a tax deduction are considered concessional.
Non-concessional contribution caps apply. If you exceed this cap, extra tax will be payable.
The ATO provides useful information about these caps.
You may be able to claim an 18% tax offset on super contributions of up to $3,000 made on behalf of a non-working or low-income working spouse (including a de facto). The maximum tax offset is up to $540 each financial year.
Eligibility requirements can be found here.
Low-income super contribution
The low-income super tax offset (LISTO) is a government superannuation payment of up to $500 to help low-income earners save for retirement.
If you earn $37,000 or less a year and you or your employer make concessional contributions, you may be eligible for a LISTO payment to be made directly into your super fund.
More information on eligibility requirement for the LISTO can be found here.
A concessional contribution is your contribution or an employer contribution to a super fund that is claimed as an income tax deduction.
Generally, these contributions include superannuation guarantee, salary sacrifice, additional employer voluntary contributions and contributions made by self-employed people, claimed as an income tax deduction. These are taxed 15% in the super fund.
A concessional contribution cap limits the amount of contributions that can be made on your behalf before more tax is payable.
More information on concessional contributions can be found here.
Non-concessional contributions are generally the ‘after-tax’ super contributions that aren’t included in the fund’s assessable income. These contributions include:
- personal contributions not claimed as an income tax deduction
- spouse contributions
- contributions over the concessional contributions cap for the year.
More information on non-concessional contributions can be found here.