End of Financial Year Tips and Tidy Ups 

Michelle Bromley CFP®, Director – Strategy and Advice

Key Points

  • Review your income streams to ensure benefits are held in the ‘retirement’ phase 
  • Top up concessional contributions & claim contribution deductions 
  • Equalise super benefits using spouse contribution splitting 
  • Review salary sacrifice arrangements 
  • Maximise after-tax contributions & gain Government co-contribution  
  • Collate tax paperwork and pre-pay expenses 
  • Tell Centrelink about any gifting or changes in circumstances to optimise your benefits 

Whether you’re an SMSF trustee or pay tax personally, its time to start preparing for the end of financial year 2022, considering annual limits for super contributions and getting prepared for upcoming tax lodgements.  

Here are my top ten tips and tidy ups pre-June 30 (please discuss with your adviser). 

1. Make sure you pay out your minimum pension from your SMSF. 

Contact your accountant to find out what your minimum requirement for the 2021/22 financial year is noting that the Government has extended, for this financial year and the next, the temporary 50% reduction in the minimum requirement introduced due to COVID. 

Make sure you’ve drawn at least that amount out of your SMSF, otherwise you may not be considered to have remained in ‘pension phase’ and that could have tax consequences for your fund. 

If you’ve got a personal pension account (such as retail, wrap or industry fund account) the minimum should be paid by the trustee by 30 June, but call your adviser if you’re unsure. 

2. Top up your concessional contributions. 

If you’re eligible to contribute and have sufficient taxable income, don’t forget that you can claim a tax deduction for personal contributions you make to super before 30 June. 

First, you must find out how much your employer will contribute for you in total, either from payslips, your fund records, or by accessing your ATO record through your my.gov.au account. 

Subtract that total from $27,500 and that’s the amount you can likely add to your super and claim as a tax deduction without exceeding the concessional cap. 

You’ll need to lodge a Notice of Intent to Claim a Tax Deduction (“Deduction Notice”) with your super fund for any personal contributions you want to claim. Just bear in mind that reducing your taxable income below the tax-free threshold isn’t optimal, as contributions tax of 15% on its way into the super fund rather than being tax-free in your hands. 

If your super balance on 30 June 2021 was less than $500,000 and you haven’t fully used your past concessional cap amounts accruing since 1 July 2018, you can potentially make a larger personal deductible contribution before 30 June; but please seek help from your adviser to confirm your eligibility. 

3. Lodge that overdue notice and income tax return to claim last year’s personal contributions! 

If last year’s tax lodgement got away from you, don’t make the mistake of missing out on the tax deduction for personal contributions you made last financial year (i.e., 2020/21) because once 30 June ticks over, the opportunity is gone. 

Just remember that the total of your concessional contributions for last financial year shouldn’t exceed the lower cap of $25,000 that applied until 30 June 2021, plus any unused carry-forward concessional amounts accrued since 1 July 2018. 

The Deduction Notice needs to be lodged before the earlier of the date you lodge your tax return or 30 June of the year following the year when the contribution was made. 

Lodge your notice, get the letter, and get up to date on your tax lodgements!  

4. Contact payroll to review your superannuation salary sacrifice from 1 July. 

It’s good practice to review your superannuation salary sacrifice each June, and more so this financial year because from 1 July 2022 the Superannuation Guarantee Rate is rising from 10.0% to 10.5%. 

Make sure you take full advantage of the increase while staying within your concessional cap. 

5. Get your tax return information together, ready for an early lodgement. 

Make the most of your time in lockdown! Find those tax receipts for charitable donations, income protection premiums you’ve paid from your own pocket, work related expenses and other documents needed to substantiate earnings and tax deductions. 

Don’t forget to pre-pay expenses such as income protection premiums or investment mortgage interest to maximise those deductions. 

6. Don’t miss out on free super from the Government! 

If you earn at least 10% of your income from employment, the Government may give you up to $500 as a Government co-contribution. You need to be less than 71 years old, earn less than $41,112 and make a $1,000 non-concessional contribution to get the full $500 but you can still get some co-contribution if you earn up to $56,112. 

7. Split concessional contributions with your spouse 

Contribution splitting allows you to transfer up to 85% of any concessional contributions made in the previous financial year to your spouse, provided they are less than their preservation age or above preservation age and up to age 65 but not retired. 

You can also split current financial year contributions but only if you are withdrawing your entire benefit from your super fund as a lump sum or rollover to another fund. 

Contribution splitting can be used as a long-term strategy to equalise super balances between spouses, potentially maximising the amount that can be transferred to the retirement phase of super within the Transfer Balance Cap.  

8. Gifting  

If you want to help your family, remember that the annual gifting threshold for social security purposes is reset on 1 July each year. The rule is $10,000pa up to a maximum of $30,000 over a rolling 5-year period (whether you are single or a couple). 

Any amount gifted over the thresholds is counted as an asset for a further 5 years and may reduce social security entitlements such as the Age Pension. 

Don’t forget to tell Centrelink when you’ve made a gift, and about any change in your circumstances within 10 working days. 

9. Review your ‘Transition to Retirement’ income stream 

A Transition to Retirement income stream can generally be started once you reach ‘preservation age’ while still working.  Anyone who is currently at least age 58 and up to age 64 can start a TTR. 

These TTRs are not ‘retirement phase’ income streams and so are taxed at up to 15% on all investment earnings, the same as ‘accumulation phase’ benefits. 

However, if you’ve met a condition of release such as a change of employment over age 60, you qualify to convert your TTR into a retirement phase income stream (called an Account Based Pension) which enjoys a 0% tax environment! 

10. The BIG one… last chance non-concessional contributions! 

If you’re close to having $1.7million in super, this might be your last chance to get extra after-tax contributions into your super fund. 

The ‘Transfer Balance Cap’ of $1.7million limits the amount of after-tax contributions that you can make to your fund.  The table below shows how much you may be able to contribute if you hadn’t already started an income stream prior to 1 July 2021.  

TSB at previous 30 June ($ millions) Standard NCC for current FY Allowable Bring-forward NCC Max NCC for current FY 
< $1.48m $110,000 2 x $110,000 $330,000 
$1.48m <> $1.59m $110,000 1 x $110,000 $220,000 
$1.59m <> $1.70m $110,000 Nil$110,000 
$1.70m or more $0 NilNil 

However, if you had an income stream in place prior to 1 July 2021 your personal Transfer Balance Cap will be between $1.6million and $1.7million and will need to be found from your my.gov.au Transfer Balance Account which is part of your tax record. 

The rules around this are complex, so you need to speak to your adviser urgently if you can contribute larger amounts. 

Reviewing key points of your personal circumstances and strategy can help keep your wealth plan on track and tax-optimised, as well as making the most of any Government incentives or benefit payments you may be entitled to. 

Please don’t hesitate to phone your adviser if you need help. 

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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