Superannuation

Written by: Article courtesy of SMSFWorks, Emma Partenza

SUPERANNUATION OPPORTUNITIES

As we begin to look at the new financial year that started a few weeks ago, it is time to take a look at superannuation contribution opportunities for individuals from 1 July 2019. The work test has been ‘simplified’ and for those with low superannuation benefits, it provides an opportunity to utilise unused concessional contributions from prior financial years. Both strategies will provide members additional opportunities to boost their retirement savings.
If we look at both measures in some detail:

Unused carry forward concessional contributions cap amounts can be made from 1 July 2019

This is not a new measure, but rather a measure that will allow individuals to boost their retirement savings by using any unused contributions from their concessional contributions cap during a financial year over the next 5 years. Where members have not used the full amount of their concessional contribution cap in a financial year, the unused portion began accruing from 1 July 2018 and carried forward to be used over the next 5 years (subject to other restrictions) as an additional contribution allowed into the fund. The first unused or ‘catch up’ concessional contributions can be made from 1 July 2019. To utilise any unused concessional contribution cap amounts from prior years, a member’s total superannuation balance on the 30 June of the previous financial year must be less than $500,000. Unused concessional contributions will carry forward over a rolling 5-year period and they are used in the order in which they were incurred. Unused amounts carried forward will expire at the end of 5 years and will be lost. It is a ‘use it or lose it’ opportunity.

Simplified work test exemption for members aged 65-74

The work test applies to individuals who are aged between 65 and 74 and wish to make contributions into their superannuation fund. To satisfy the work test they must work for a period of 40 hours in a consecutive 30-day period before the contribution can be made into the fund. From 1 July 2019, individuals who would ordinarily be required to meet the work test to contribute are eligible for an exemption for one year from being required to meet the work test so they can boost their superannuation benefits. The exemption year applies the year after the member last met the work test. As with many exemptions, there are eligibility criteria:

• the member is aged between 65 and 74;
• the member satisfied the work test in the previous financial year (prior to the financial year in which the contribution is made);
• the member had a total superannuation balance (TSB) of less than $300,000 at the end of the previous financial year; and
• the member has not made prior contributions under the work test exemption in a previous financial year (i.e. this is a once off exemption).