Proactive Superannuation Planning

As a small business owner, juggling multiple responsibilities is the norm. With June 30 fast approaching, understanding superannuation can save you a lot of headaches and potentially a lot of money. Let’s dive into the key aspects of superannuation you need to be aware of before the end of the financial year.

Annual contribution limits for superannuation

Concessional Contributions

Concessional contributions are pre-tax contributions such as employer contributions and salary-sacrificed amounts. For the 2024 financial year, the concessional contribution cap stands at $27,500 per individual. This cap will increase to $30,000 from July 1, 2024.

Key Points:

• Employer Contribution Rate: Currently at 11% for the 2024 financial year, increasing to 11.5% from July 1, 2024.
• Catch-Up Contributions: If your total superannuation balance is below $500,000, you can use up to five years’ worth of unused concessional contribution caps. This is particularly significant if you have caps from the 2019 financial year that expire soon.
• Maximisation Methods: Consider salary sacrificing or making personal concessional contributions. Both methods can help you maximise your superannuation contributions before the end of the financial year.

Non-Concessional Contributions

Non-concessional contributions are after-tax contributions. The annual cap for these contributions is $110,000 for the 2024 financial year, increasing to $120,000 from July 1, 2024.

Important Considerations:

• Individuals aged 75 and over generally cannot make non-concessional contributions unless they are mandated contributions.
• If your total superannuation balance is $1.9 million or higher, you are not permitted to make non-concessional contributions.

Contribution strategies prior to June 30, 2024

For Employers

Ensure that all superannuation guarantee contributions for your employees are made before June 30 to qualify for a tax deduction in this financial year.

For Individuals

If you’re planning to claim a tax deduction for personal superannuation contributions, you must lodge an “Intent to Claim a Superannuation Deduction” form with your super fund and receive an acknowledgment back from them.

Superannuation Guarantee changes

Starting from July 1, 2024, the superannuation guarantee contribution rate will increase from 11% to 11.5%. This means that from the next financial year onward, employers will need to contribute more to their employees’ superannuation funds.

Minimum Pension requirements

If you’re drawing a pension from your superannuation, make sure the minimum pension payment has been withdrawn for the financial year before June 30. Failing to do so could mean that your pension is deemed to have stopped, which could have significant implications.

Non-arm’s length income and expenses

Be mindful of any non-arm’s length income and expenses, as they can attract a higher tax rate. Ensure all transactions involving your superannuation fund are conducted at market value to avoid penalties.

Safe harbour interest rate rises for related-party LRBA loans

If your superannuation fund has a limited recourse borrowing arrangement (LRBA) with a related party, note that safe harbour interest rates have risen. It’s crucial to update the terms of your loan to ensure compliance with ATO guidelines.

Reduced GST input credits for advice fees in Superannuation

Effective from the new financial year, GST input credits for certain advice fees in superannuation will be reduced. Plan accordingly to manage your expenses and tax liabilities.

Final Tips and Actionable Advice

Review and adjust contributions

Take a close look at your current contributions and make any necessary adjustments to maximise your tax benefits. Be proactive in planning your contributions for the next financial year as well.

Keep an eye on changes

Stay updated on legislative changes affecting superannuation. The rules can change frequently, and being aware of these changes can help you make informed decisions.

Consult with professionals

Seek advice from financial advisors or accountants specialised in superannuation to ensure you’re making the most of your contributions and complying with all regulations.

Don’t delay

Procrastination can cost you. Make any necessary contributions and adjustments well before the June 30 deadline to avoid any last-minute stress or errors.

Superannuation is a vital component of financial planning for both individuals and businesses. Understanding the various contribution limits, strategies, and regulatory changes can help you optimise your superannuation before June 30. By staying informed and proactive, you can ensure your superannuation strategy aligns with your financial goals.

The end of the financial year is a critical time for superannuation planning, so don’t wait – start now!

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