What's new in super and tax this financial year?

Written by Tahlia Johnson

The 2019/2020 financial year introduces some new opportunities to allow you to save for your retirement through super. Below Bridges also provide an overview of the ‘protecting your super’ legislation and personal income tax changes.

Superannuation

Claiming a deduction on personal super contributions

Since 1 July 2017, employees as well as the self-employed, can claim a tax deduction on personal super contributions.

If you are aged between 65 and 74 you can make a contribution to super but you need to meet a work test. To pass the work test, you need to have been ‘gainfully employed’1 for at least 40 hours over 30 consecutive days during the financial year in which you plan to make the contribution. That’s a little over one week’s worth of full-time work in a single month.

Also, if you’re aged between 65 and 74 and have a ‘total super balance’2 under $300,000, you can make personal contributions to super in the first financial year in which you no longer meet the work test. This is likely to be the first year following your retirement.

Unfortunately, if you are 75 or over you are not eligible to make a personal contribution to super.

What if you didn’t contribute last financial year – do you miss out?

For the first time this financial year, if you have a total super balance of under $500,000, you can contribute the unused portion of your concessional contributions cap, or ‘carry-forward’ amount, from last financial year. That is, if you didn’t contribute in the 2018/19 financial year, you may be able to carry forward $25,000 to this financial year and contribute up to $50,000.

Currently, only the unused concessional contribution cap amounts in the 2018/19 financial year can be carried forward. Then, for future financial years, the unused concessional contribution cap amounts can be carried forward, on a rolling basis, for five years.

So, if you’ve accrued a carry-forward concessional contribution amount, you may want to start, or increase your salary sacrifice contributions, or make a personal concessional contribution to super. This can be particularly beneficial for your tax bill if you’ve significantly increased your income, for example, if you’ve sold an asset with a large capital gain.

Personal income tax rates

Australians can continue to enjoy the first round of personal income tax changes that started in July 2018.

From 1 July 2022, the Government will increase the 32.5% tax threshold from $90,000 to $120,000. This means there will be less people in the 37% tax bracket and more in the 32.5% tax bracket. On 1 July 2024, the 37% tax bracket will eventually disappear and the 32.5% tax bracket will reduce to 30%. It’s estimated that 94% of personal taxpayers will have a marginal tax rate of 30% or less in the 2024/25 financial year.

Tax offsets

In addition to the changes to income tax, the Government has introduced a temporary tax offset called the low and middle income tax offset (LMITO), of up to a maximum of $1,080 per person and phases out for those earning over $126,000 per annum.

This is in addition to the low income tax offset (LITO) for those earning under $66,666 per annum.

The LMITO offsets will end after the 2021/22 financial year. However, from 1 July 2022, the Government will increase the (LITO), from $445 to $700 to continue to support low income earners.

You don’t need to do anything to receive the tax offsets, the ATO will assess your eligibility when you complete your personal tax return.

Future changes to tax rates and thresholds

1 The ATO defines gainful employment as employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
2 Your ‘total super balance’ is measured on 30 June of the previous financial year and is calculated by adding several items together including both accumulation and pension interests of your super.

Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL 240837. Bridges is part of the IOOF group. This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making a decision based on this information, you should assess your own circumstances or consult a financial planner or seek tacation advise from a registered tax agent.

In referring customers to Bridges, South West Slopes Credit Union Ltd. does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.

Notice of Changes to our Fees & Charges

Written by Tahlia Johnson

SWSCU prides itself in keeping its fee structure as fair as possible for its members and to this point it has not reviewed its overall fee structure since 2011. However since the last review our suppliers have continued to increase a number of costs on products and services that we have no control over and this has led to SWSCU having to update some fees to cover our costs. Most of our members will not be affected by the small number of fee increases which will be effective from 16 September and we would like to thank our members in advance for your understanding and ongoing support.

A link for the updated Schedule of Fees & Charges can be found here.

Super Dependants

Written by Tahlia Johnson

If you have a superannuation fund, you’ve probably been asked to nominate your beneficiary. But, super fund trustees can only pay your super death benefit to eligible dependants or to the legal personal representative of your estate. Bridges, our financial planning partner, explains what you and your family need to know.

Make the most of your tax deductions and strategies

Written by Tahlia Johnson

Now’s the time to put in place the strategies that could save you paying more tax than you need to. Bridges, our financial planning partner, provides their tax tips and a tax return checklist here.