Are you ready for end of Financial Year?
End of Financial Year is fast approaching, but what needs to be done before then? Our tip is to do it as early as you can to avoid any headaches.
There are a few things to think about depending on your position, but I will focus on all things superannuation that relate to end of financial year.
All contribution limits apply to the financial year dates, and amounts must be received prior to 30 June to be counted in the current year caps.
Most of you will know that the concessional contribution limit is $25,000, and for those targeting this amount there are a couple of things to consider:
- When are your contributions received? If they are paid by your employer you need to ensure that they will be received prior to 30 June, otherwise you may not use part of your limit.
- Have you received a bonus? You might not realise that bonuses generally have a superannuation contribution also, so if you have a salary sacrifice arrangement in place it might be worth checking how much has already been contributed to ensure you don’t exceed the cap.
- Was your income higher than you expected? It’s not too late, recent changes mean that you are able to contribute an amount to superannuation and claim a tax deduction for these contributions
The limit for these after-tax contributions is $100,000 for the financial year, however you are able to bring forward two future years if you are under age 65. This can be an effective strategy where you are approaching retirement. Again these amounts need to be received before 30 June to be counted in this years limits.
If you are drawing a pension from superannuation you are required to draw a minimum pension, the majority of funds will ensure this is met. In the situation where your are in a SMSF you will need to ensure that this amount has been paid before 30 June.
What if you miss the deadline?
There are some minor and some major impacts for missing the deadline:
- If you don’t make your concessional contribution you will lose your tax deduction, but the silver lining is this is the first year that you may be eligible to rollover your unused cap to future years.
- If you don’t make your non-concessional contribution, you cap will be lost, this becomes a problem where you have significant wealth to transition to superannuation, or if you are turning 65.
- If you do not make your pension payments, the biggest risk is to be found non-compliant for your SMSF, as it sounds the consequences are significant.