EoFY 2022 – What you need to consider… NOW
Nina Kazmierczak- Partner and Principal Adviser
Sovereign Wealth Partners
It’s like Christmas without the gifts, just the work. However, good planning pays dividends. Here are some important points and cut-off dates you should be considering so you’re well prepared for 30 June.
Concessional contributions. You can make concessional, or pre-tax contributions to superannuation to the new limit of $27,500 per annum.
If you have made less than this but have the capacity to go up to the cap, it is worth considering. If your employer can’t facilitate this for you, all is not lost, you can make the contribution yourself and claim a tax deduction in your tax return. If your total superannuation balance is less than $500,000 at 30 June of the prior financial year, you have the ability to carry forward your unused concessional contribution cap for up to 5 years for use in future financial years. Seek advice before doing this and be sure not to go over the limit.
Non-concessional contributions. If you are eligible, you can also make non-concessional (after tax) contributions of up to $110,000 per annum.
This is worth considering if you don’t need access to the funds until you meet a ‘condition of release’ – for many, this is some time after turning 60 years of age. Under current legislation, if you are aged under 67, you may also be eligible to bring forward future non-concessional payments via the “3yr bring-forward” rule and contribute $300,000. Note- if your superannuation/pension member balance is greater than $1.7M you are no longer eligible to make non-concessional contributions (note that the increase to the transfer balance cap came into effect from 1 July 2021, if your transfer balance has been met in previous years this too limits eligibility).
Transfer Balance Cap
From 1 July 2021, the $1.6M transfer balance cap (TBC) increased to $1.7M. If you are initiating a retirement phase income stream (eg. pension) for the first time after 1 July 2021, your TBC will be $1.7M. If you started a pension before 1 July 2021, and your transfer balance cap account was less than $1.6M you may have scope to increase the cap slightly. Depending on your circumstances your personal transfer balance cap may be between $1.6M and $1.7M. It is imperative that you seek advice before making any contributions towards your TBC. This area becomes quite complicated.
Co-contribution. If you aged under 71 and eligible, you can receive a maximum $500 Government contribution to your super fund if you contribute at least $1,000 as a personal contribution. To be eligible for this benefit you need to be earning less than $56,112 (highest income threshold) to qualify for a part payment as well as earning at least 10% of your income from work related activities, in addition to a few other eligibility criteria.
Spouse contributions. If you make a contribution on behalf of your spouse (married or de facto) who is earning a low income (less than $40,000 – note conditions apply) or not working, you may be eligible to claim a tax offset of up to $540. Please note that eligibility criteria apply including contribution amounts.
Split your super with your spouse. Contribution splitting allows you to transfer a certain percentage (max 85%) of your concessional contribution made this year to your spouse. Your spouse must be aged between 55 (or their preservation age) and 65 and the split must be lodged in the financial year after the financial year in which the contribution as made.
Contribution splitting may be worth considering if you want to:
Potentially gain access to your super sooner (if your spouse is older)
Reduce your total balance if you are nearing the $1.7 million cap
Boost your spouse’s retirement savings
In-specie transfers. Another way to contribute to superannuation is via an in-specie transfer of investments held outside of superannuation. They are still capped at the allowable limits noted above.
Note- many of the administration platforms or custodians have cut off dates to ensure that the paperwork and transfers are completed in time for 30 June. Please speak with us and check the cut of dates to ensure you don’t miss out on the opportunity if it’s available to you.
Pension Payments – Minimum pension payments. To avoid penalties issued by the ATO, check the minimum payments which must be made and be sure they are made prior to 30 June. Please note that for FY22, the Government has further extended the halving of the pension minimum amounts.
Where the pension drawn is in excess of the minimum, and your overall member balance exceeds $1.6M, consider if the excess should be treated as a pension or a lump sum withdrawal from an accumulation account to preserve funds in pension phase.
Investment loans – prepaying interest. Depending on your circumstances, it may be a worthwhile exercise to pre-pay 12 months of interest on your investment loan. You may be able to negotiate a lower rate with your provider by paying them the interest sooner. You will need to consider all aspects of the cashflow involved, including the impact of any differential in tax rates that may apply for you in this and in the next tax year.
Capital Gains and Losses –If you’ve realised a net investment gain this financial year and haven’t sold any assets at a loss, you may end up paying tax on those gains. You might want to consider bringing forward the disposal of an asset carrying a capital loss to offset other capital gains. This might be achieved by simply transferring the investment to another entity like your superannuation account.
Investments – if in this current financial year you expect to fall into a lower tax bracket than future years, you might consider realising capital gains for those assets eligible for the 50% CGT discount.
Please speak with us or your tax adviser before implementing any transactions.
Expense recognition –many of us continue to work from home following the COVID pandemic. If you are working from home, you may be able to claim a deduction for expenses relating to that work. These are generally home office running expenses, phone and internet expenses. The ATO has provided a temporary simplified method for calculating work related expenses for the 2022 financial year.
There are 3 methods of calculating home office expenses- you can claim a deduction of 80 cents for each hour you work from home, this is the Shortcut method. The fixed rate method of 52 cents per working hour or the Actual cost method. This should be discussed with your tax professional.
Again, please note- that the descriptions above have been simplified, for more detail and advice contact your accountant and/or your Sovereign Wealth Partners adviser.
Philanthropy – if you intend to support any worthy charities, don’t forget! Consider the tax benefit and make the most of your timing options.
Income Protection insurance premiums – typically, if you pay premiums annually the insurer will discount the premiums. The premiums are also a tax-deductible expense so you might consider switching your premium to make your premiums cheaper and bring the tax deduction forward.
Trust distributions – if you have a discretionary or family trust, make sure that you make the required distributions. Retained earnings may be taxed in the hands of the trustee at the highest marginal tax rate. You may have other considerations pertinent to your personal situation.
Cut-off dates set by platform administrators
Macquarie Wrap –
Contribution and Deposits- via ETF or BPay. These need to be made by 4pm Monday 27 June 2022. If you are planning on making BPay contributions and/or deposits and require the correct BPay biller code for the contribution/deposit type please let us know and we can provide you with the correct details to ensure the funds are classified correctly.
Cheque contributions and branch deposits. Any cheque contributions or deposits will need to be RECEIVED by Macquarie by 4pm Monday 27th June 2022. If you are considering posting Sovereign Wealth a cheque to deposit on your behalf please ensure you leave sufficient time for the cheque to be mailed and received. You are able to personally deliver any cheques to the Macquarie cash account counter at 1 Shelley St.
Withdrawal requests- ALL withdrawal requests will be due by 2pm Monday 27th June 2022.
In-specie asset transfers- Thursday 9th June 2022.
Contribution and Deposits- via ETF or BPay. Amounts transferred via BPAY are generally received by Netwealth 2 business days after being submitted (but can take up to 4 business days). Netwealth is not responsible for any delays in receiving the monies. In this case, online transfers should be completed by Friday 24th June 2022.
Direct debit requests (DDR) DDR form/request must be received by Netwealth prior to 12 midday (AEST) on Monday 27 June to enable them to initiate the inward transfer.
Branch Deposits Non-ANZ cheques or bank cheques may take more than 1 business day to clear. Client should confirm with the bank teller that funds will clear no later than Monday 27 June. For your branch deposit account details please contact your Sovereign Wealth Adviser. This can also be located online.
We do recommend that you seek professional advice before undertaking any strategy.
Sovereign Wealth Partners is here to help. Should you have any doubt or queries please do not hesitate to contact us on (02) 8216 1777 or firstname.lastname@example.org
Disclosure Statement: This communication has been approved and issued by Sovereign Wealth Partners Pty Ltd ABN 18 607 071 367 Corporate Authorised Representative (No. 001233909) of Sovereign Capital Pty Ltd ABN 44 164 127 833, AFSL 456235.
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