Planning on making super contributions this financial year?
As we move into the fourth quarter of the financial year, it is time we turn our mind to tax planning and the things we need to be considering as 30 June approaches.
You need to be very careful of the correct timing to make superannuation contributions. Every year we hear stories of people who made contributions to super, only to find out their contribution wasn’t made in time.
You would think that in this modern age of electronic transactions, making a super contribution by way of electronic transfer or BPAY would be pretty straightforward.
Let’s assume that I plan to make a personal contribution to super. On top of that, I intend to claim a tax deduction for my contribution in the current financial year.
Being like most people, I will leave it to the very last minute and on 29 June I will go online and transfer the contribution from my bank account to my super fund. I will use their BPAY code for the payment.
It is all so simple – what could possibly go wrong?
- When making a super contribution by way of electronic funds transfer, the contribution is not deemed to be made until it appears in my super fund’s bank account. If I initiate the transfer on 29 June 2018 (a Friday), it may not appear in my super fund’s bank account until early in the following week – around 2 or 3 July.
- As my contribution was not technically received by my super fund until early July, it is unlikely I will be able to claim a tax deduction for my contribution until the 2018-19 financial year. This may result in me paying more tax than planned this year.
- My contribution will be counted against my contribution cap for the 2018-19 financial year. While this may generally be fine, it can create an undesirable outcome if I have also planned to maximise my contributions in the 2018-19 year.
- What if I have turned 65 in the 2017-18 financial year and had retired at some point during the year. As I am now 65, I will need to meet the work test (be gainfully employed for at least 40 hours worked within a period of 30 consecutive days) for my super fund to be able to accept my (2018-19) contribution.
- Even if I wasn’t intending to claim a tax deduction for my contributions, but instead I wanted to maximise my non-concessional contributions, not having made my 2017-18 contribution in time will have similar ramifications, particularly where I intended to maximise contributions both this year and next.
As 30 June falls on a Saturday this year, planning ahead is so important.
Where possible make your super contributions early so there is plenty of time for it to be received.
Source: Peter Kelly | Centrepoint Alliance
