Year-End Superannuation Review: Preparing for EOFY
Written by Ben Waite
As the end of the financial year (EOFY) approaches, it's essential to review your superannuation strategy to maximise your benefits and ensure compliance. This comprehensive guide will help you navigate key areas, including concessional and non-concessional contributions, co-contributions, spouse contributions, tax offsets, investment strategy, insurance with super, and compliance and documentation. Let's dive in.
1. Concessional Contributions
Concessional contributions are pre-tax contributions that include employer contributions (like the Superannuation Guarantee), salary sacrifice arrangements, and personal contributions for which a tax deduction is claimed. The annual cap for concessional contributions is currently $27,500. Contributions exceeding this cap may incur additional tax liabilities. To make the most of concessional contributions, consider salary sacrificing or making additional personal contributions up to the cap.
2. Non-Concessional Contributions
Non-concessional contributions are made from after-tax income and are not taxed within the super fund. The annual cap for non-concessional contributions is $110,000. If you're under 67, you can take advantage of the bring-forward rule, allowing you to contribute up to $330,000 over three years. These contributions are essential for maximising your super balance, especially for those approaching retirement.
3. Superannuation Co-Contributions
If you're a low or middle-income earner, you might be eligible for a government co-contribution. For every dollar you contribute to your super from your after-tax income (up to $1,000), the government may contribute up to 50 cents, with a maximum co-contribution of $500. To qualify, your total income must be below the threshold ($57,016 for the 2023/24 financial year), and you need to have made at least one eligible non-concessional contribution during the year.
4. Spouse Contributions
Contributing to your spouse's superannuation can be a tax-effective way to boost their retirement savings while potentially receiving a tax offset. If your spouse's income is $37,000 or less, you may be eligible for a tax offset of up to $540 for contributions up to $3,000. Even if your spouse earns up to $40,000, you can still receive a partial offset. This strategy not only aids in building your partner's super but also reduces your tax liability.
5. Tax Offsets
Beyond spouse contributions, there are other tax offsets to consider. For example, the low-income superannuation tax offset (LISTO) benefits individuals earning $37,000 or less. Under LISTO, the government contributes 15% of your concessional contributions (up to $500) back into your super fund, offsetting the tax paid on these contributions.
6. Reviewing Your Investment Strategy
The EOFY is an excellent time to review your superannuation investment strategy. Consider your risk tolerance, investment horizon, and retirement goals. Assess the performance of your current investments and make adjustments if necessary. Diversifying your portfolio can mitigate risk and potentially enhance returns. Consult a financial advisor if you're unsure about your investment choices or need to rebalance your portfolio.
7. Insurance with Super
Superannuation funds often offer insurance coverage, including life insurance, total and permanent disability (TPD) insurance, and income protection insurance. Review your current coverage to ensure it aligns with your needs and circumstances. Adequate insurance is crucial for protecting yourself and your family against unexpected events. However, premiums are deducted from your super balance, so ensure the coverage is cost-effective.
8. Compliance & Documentation
Ensuring compliance with superannuation rules and maintaining proper documentation is vital. Keep detailed records of all contributions and transactions. Check that your super fund has your tax file number (TFN) on file, as this affects your eligibility for tax concessions and government contributions. Stay updated on legislative changes that might impact your superannuation strategy.
Key Compliance Actions:
· Verify that all contributions are within the respective caps.
· Ensure timely payment of contributions to avoid penalties.
· Review and update your beneficiary nominations.
As the EOFY approaches, taking the time to review and optimise your superannuation can significantly impact your retirement savings. By understanding and utilising concessional and non-concessional contributions, superannuation co-contributions, spouse contributions, tax offsets, and ensuring proper compliance and documentation, you can make informed decisions that benefit your financial future. Additionally, reviewing your investment strategy and insurance coverage ensures your superannuation aligns with your goals and provides the necessary protection for you and your loved ones. Chat with our team today to consult a financial advisor for personalised advice and to maximise the benefits of your superannuation strategy.