Super guide for employers, employees and self-employed - Quantiphy
 

Super guide for employers, employees and self-employed

June 15, 2021

As we approach the end of the 2021 financial year it is prudent to outline some of the pertinent superannuation changes that come into effect from 1 July and the current opportunities available to consider prior to 30 June in terms of contributions to super to obtain tax deductions for the current financial year. Alternatively, the below information will be worth understanding for your superannuation strategies in future years.

Super for Employers

As all employers will be aware the super guarantee (SG) regime mandates the minimum amount you are required to pay employees to avoid the super guarantee charge. The super guarantee rate has been set at 9.5% since July 2002 and calculated with reference to an employee’s ordinary time earnings (OTE).

However from 1 July 2021 the SG rate is due to increase to 10% and the following table outlines increases in that rate for future years:

1 July 2021 – 30 June 2022 10.00
1 July 2022 – 30 June 2023 10.50
1 July 2023 – 30 June 2024 11.00
1 July 2024 – 30 June 2025 11.50
1 July 2025 – 30 June 2026 12.00

If you pay an employee $450 or more (before tax) in salary or wages in a calendar month, you must also pay super guarantee for them. Salary or wages includes any overtime.

Generally, all employees are eligible for super. It doesn’t matter if the employee is:

  • full-time, part-time or casual
  • receiving a super pension or annuity while working (this includes employees on transition to retirement)
  • a temporary resident, such as a backpacker
  • a company director
  • a family member working in your business

It may be worthwhile doing a review of all your employees and assessing their entitlement to receive super using the ATO self-assessment tool – Click here

Concessional contributions and contribution caps

Concessional contributions are contributions that are made into your super fund before tax i.e. those contributions you claim a tax deduction for. They are taxed at a rate of 15% in your super fund.

From 1 July 2021, the concessional contributions cap is $27,500

Up until 30 June 2021, the concessional contribution cap is $25,000.

Your cap may be higher if you did not use the full amount of your cap in earlier years. This is called the carry-forward of unused concessional contributions. These carry-forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.

However, your ability to access the bring forward concessional contributions cap is limited to those that have a total super balance of less than $500,000 at the end of 30 June of the previous financial year.

You can check your available concessional contributions cap on ATO online services (accessed via myGov) or contact us if you don’t have access to myGov.

Types of concessional contributions

The following are the most common types of concessional contributions:

  • employer contributions, such as
    • compulsory employer contributions
    • additional concessional contributions your employer makes
    • salary sacrifice payments made to your super fund

If you have more than one fund, concessional contributions made to all your funds during a financial year are added together and counted towards your concessional contributions cap.

Division 293

If your combined taxable income and concessional contributions is more than $250,000 you may have to pay extra tax. Division 293 tax is charged at 15% of an individual’s taxable contributions.

How you will know if you have to pay

You will be sent a notice of assessment once the ATO matches both your reported income in your annual tax return and contribution information from your superannuation fund. For those with SMSF, we report your contribution information in your behalf.

Non-concessional contributions and contribution caps

Non-concessional contributions are:

  • from your after-tax income
  • not taxed in your super fund.

From 1 July 2021, the non-concessional contributions cap is being increased to $110,000 as a result of indexation in line with average weekly ordinary time earnings (AWOTE). If you contribute more, you may have to pay extra tax.

Up until 30 June 2021, the non-concessional contributions cap is $100,000.

However, your current and future year cap might be different. It may be higher, if you can use the bring-forward arrangements or could be nil in the circumstance if your total super balance is greater than or equal to the general transfer balance cap ($1.6 million from 2017–21; $1.7 million from 2021–22).

Bring-forward arrangements

If you make superannuation contributions above the annual non-concessional contributions cap you may be eligible to automatically gain access to future year caps. This is known as the bring-forward arrangement. It allows you to make extra non-concessional contributions in a given year without having any tax consequences.

Eligibility for the bring-forward arrangement depends on both your :

  • age
  • total super balance on 30 June of the previous financial year.

Age

If you are under 65 years of age at any time in a financial year, you may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

Note: A change to this age restriction is currently before Parliament. If passed, this law would change the age restriction to be under 67 years of age at any time in a financial year for 2020–21 and later financial years.

If you are already 65 years old or older when the financial year begins on 1 July, you cannot access the bring-forward arrangement in that financial year. You need to meet conditions for certain types of contributions to be accepted by your super fund, including satisfying the work test or work test exemption.

Note: A change to this age restriction is currently before Parliament which would change the age restriction to be 67 years or older on 1 July for 2020–21 and later financial years.

Total super balance

From 1 July 2017, your total super balance affects:

  • the non-concessional contributions cap amount that you can bring-forward
  • whether you have a two or three year bring-forward period.

Your total super balance is determined at the end of 30 June of the financial year before the year in which you made the contributions that triggered the bring-forward.

For 2017–18 onwards, to access the non-concessional bring-forward arrangement you must meet all these conditions. You:

  • are under 65 years old for at least one day during the triggering year (the first year)
  • contribute more than the annual cap ($100,000 from 2017–21; $110,000 from 2021–22)
  • are not already in an active bring-forward period
  • have a total super balance at the end of 30 June of the previous financial year that;

 

  • is less than the general transfer balance cap ($1.6 million from 2017–21; $1.7 million from 2021–22)
  • has a capacity greater than the annual non-concessional contributions cap ($100,000 from 2017–21; $110,000 from 2021–22). For example, for 2020–21 your total super balance at the end of 30 June 2020 must be less than $1.5 million.

Note: A change to the age restriction for the bring forward arrangement is currently before Parliament. If passed, this law would change the age restriction to be 66 years or younger for 2020–21 and later financial years.

Once a bring-forward arrangement is triggered in a financial year your non-concessional contributions made in the next one or two years cannot be more than the sum of your increased bring-forward non-concessional contributions cap amount minus the non-concessional contributions made in the year the bring-forward was triggered.

For example, if you used your total increased bring-forward cap in the first year, you would have a nil cap for the next two years.

The bring forward arrangements are very difficult to navigate and we recommend you speak to us before trying to access the bring forward arrangements.

From 1 July 2021

The amount of the non-concessional contributions cap you can bring forward is either:

  • three times the annual non-concessional contributions cap over three years (that is, $330,000) if your total super balance on 30 June of the previous financial year is less than $1.48 million
  • two times the annual cap over two years (that is, $220,000) if your total super balance on 30 June of the previous financial year is above $1.48 million and less than $1.59 million
  • nil ($0) if your total super balance is $1.59 million or above.

These limits are based on the:

  • non-concessional contribution cap of $110,000
  • total super balance in relation to the general transfer balance cap of $1.7 million.

The following table represents the bring-forward arrangement for the first year.

Table 3: Bring-forward period
Total super balance on 30 June of previous year Non-concessional contributions cap for the first year Bring-forward period
Less than $1.48 million $330,000 3 years
$1.48 million to less than $1.59 million $220,000 2 years
$1.59 million to less than $1.7 million $110,000 No bring-forward period, general non-concessional contributions cap applies
$1.7 million or more nil Not applicable

If you have more than one fund, the total of all non-concessional contributions made to all your funds during a financial year count towards your non-concessional contributions cap.

The rules surrounding superannuation contributions and tax deductibility are as you can see very complex so we highly recommend you contacting us to discuss your particular circumstances prior to making contributions.

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