Clock ticking to sort super contributions

There are only a few days to go until the end of financial year, but it's not too late to get a few really important things done.

If any of the following apply to you, you will want to act, without delay, today.

Be aware of transfer deadlines

Last minute contributions, whether concessional, non-concessional or for your spouse, need to be done by June 30. That is, the funds need to be received by the fund, by close of business on June 30.

If they arrive into the fund on July 1, they count towards next year's limits, which won't suit some of you at all.

And with some banks still not processing fund transfers on weekends, that will mean making sure the receiving bank or institution has acknowledged receipt of contributions by Friday afternoon or Saturday morning.

Unless it is an intra-bank transfer, which should be immediate, don't expect anything you try to transfer on a Saturday to make it to your nominated super fund account until Monday or Tuesday (which is too late).

EFT is usually overnight, but BPAY can take two days, so get it done today.

Most of today's column are things you might want to get on your "to do list" this morning. Plus, down further, a reminder about the critical insurance deadline that is approaching, effectively Friday night, which I raised in my last column.

Pension minimums paid

You may lose your tax-free status for the fund for the year if your super fund has not made minimum pension payments prior to June 30.

If you're in doubt, urgently check with your accountant what your minimum pension payment is for the 2019 financial year. Or check your FY2018 accounts to find out the account balances for the pension funds, so that you know what your minimum pension fund payments are.

Check your SMSF bank account to find out how much money you have transferred out to your personal name. Is it enough?

Don’t forget to note higher payments, if you have moved "up an age bracket" over the last year. Here are the minimum pension payments for each band of age groups.

Table 1: Minimum percentage payments, by age

Not making the minimum pension payments can mean you lose your tax-free status for your pension fund for the year, meaning you'll pay up to 15 per cent on income and 10 per cent on capital gains, as you'll essentially be treated as having been in accumulation for the year.

The bigger your fund, the more costly this will be.

Concessional contributions

For those eligible, you can make contributions of up to $25,000 for concessional contributions for this financial year.

If you are an employee, you'll need to know when your super has been paid, or when it will be paid, from your employer's Superannuation Guarantee Contributions (the 9.5 per cent).

Employees can make a top-up payment. But you'll need to know what your employer has paid this financial year. An interesting, if frustrating, part of SGC, is that employers don't have to contribute in the year in which the contribution relates to. That is, if you're owed $3000 for the April to June period for this year, then your employer might not pay it until up to July 28. However, if the company wants to pay it early, they can.

For a small number of people, it can make contributions at this time of year a little tricky. Is their employer going to make a last minute payment that might take them up near the limit? If this is a possibility for your employer, you should call your pay office and ask when they are going to make the June payment, in case the amount you are considering contributing would then push you over the $25,000 limit.

For the self-employed, it's a lot easier. You've had control over your contributions for the whole year (generally). If you know you can put in another $5000, $10,000 or $15,000, then you can do so, if it makes sense for you.

Be aware, however, that this is the first year that you can carry forward your CCs to next year. If you only use $13,000 of your CCs this year, you can carry forward $12,000 for up to the next four financial year, so long as you have less than $500,000 in your Total Superannuation Balance, which is measured as of June 30, 2018.

Non-concessional contributions (NCCs)

NCC limits are set at $100,000 a year, or four times the CC limit. You are able to "pull-forward" two years of these limits from future years, in certain circumstances.

For those who have more than $1.4m in Total Superannuation Balance (TBC), your ability to contribute is somewhat restricted. As I pointed out in this article, your TSB is calculated not at the time that you're wanting to make the contribution, but as of 30 June for the previous financial year.

So, if your super fund's balance was $1.38m on June 30, 2018, but growth in the portfolio during the current financial year has taken it to $1.46 million, then you are still able to put in $300,000, using the pull-forward rules (if eligible) during the current financial year. See my April column for more details.

Government co-contribution

The government co-contribution allows those who have incomes of less than $37,697 to make non-concessional contributions of up to $1000, which will then receive a government co-contribution of up to $500 (but no more than 50 per cent of the contribution).

This cuts out at 0.03333 cents per dollar over $37,697, until it finally cuts out at $52,697.

Spouse contribution

Spouses are able to make contributions of up to $3000 a year for low-earning spouses and earn a tax rebate of up to $540.

The low-earning spouse must earn less than $37,000 a year to get the full benefit. The $540 tax offset is wiped out where the low-earning spouse earns more than $40,000.

Spouse contribution splitting

A really important strategy for those who have higher balances, or those who think they will have higher balances in the years to come, particularly approaching retirement.

Spouse contribution splitting allows you to transfer your CCs for a given year across to your spouse's superannuation account (net, after allowing for the 15 per cent contributions tax).

It can, over a longer period of time, allow for a significant evening up of contribution balances, so that one of you doesn't significantly blow the $1.6m Transfer Balance Cap, while the other one is a long way short of it.

The "split" needs to occur before the end of the financial year, following the financial year of contributions. That is, if you want to do a spouse contribution split for last year (FY18), then it needs to have been done by 30 June this year (FY19).

Protecting Your Super legislation

See my last column for more detail, but if you have insurance in any APRA-regulated fund and you haven't checked to see if it's still in place, then this is probably the most important thing that you can do today.

If you still need the insurance, then you either need to send the super fund an election to say that you want to maintain the insurance, even if there have been no contributions made for 16 months or make a quick contribution today.

The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.

Bruce Brammall is managing director of Bruce Brammall Financial and is both a licensed financial adviser and mortgage broker. E: bruce@brucebrammallfinancial.com.au.