2012 Superannuation Tax Advice

Salary sacrifice additional concessional (tax deductible) employee contributions

• Consider additional contributions (including superannuation guarantee contributions) to use up unapplied annual thresholds to save the difference between your marginal tax rate and the superannuation contributions tax rate (e.g. 46.5 percent-15 percent = 31.5 percent tax saving).
• General employees: $25,000.
• Over 50: $50,000 (Note this is the last year for over 50’s to contribute $50,000 following budget changes).
• Review contributions paid in 2012 contribution year and you should be aware of the contribution caps (unpaid cap amounts are not carried over to future financial years and excess contributions tax will apply on overpaid cap amounts).

Consider eligibility to make personal tax deductible contributions: Where employment is less than 10 percent of total income you may qualify to make tax deductible personal (non-employment) contributions.

Consider making additional personal non-concessional (non-deductible/ assessable) contributions

• Consider contributing spare after tax cash to superannuation to thresholds (no tax deduction and no tax in the fund). Accrue future earnings at low tax rate of between 15 percent and 0 percent.
• $150,000 per annum; or
• bring forward contributions for 3 years to a maximum one-off contribution of $450,000.
• Watch further age based limits which apply.

Confirm you have not made “excess” superannuation contributions: Contributions (concessional and non-concessional) that exceed the relevant thresholds can be subject to tax at top marginal rate or greater.

Consider borrowing to make superannuation contributions: For business, borrowings to fund employee superannuation contributions will be tax deductible.

Review minimum annual pension (income stream) payments: Take out minimum pensions for 2012 income year before 30 June 2012.

Government co-contribution: Make an after-tax contribution into super to qualify for the government co-contribution. If your income for the financial year is below $31,920, you’ll receive a $1 for $1 benefit up to $1,000 and the co-contribution will be phased out until income reaches $61,920 when it will disappear.

Split super contribution with your spouse: If your spouse earns less than $13,800, make an after-tax contribution up to $3,000 and qualify for a maximum tax offset of $540.

SMSFs: Keep within in-house asset rules: If your self-managed superannuation funds in-house asset holding is more than the 5 percent limit on in-house assets, reduce it by 30 June 2012.

Commence your superannuation pension prior to 1 July 2012: Consider commencing your pension in June 2012, no minimum pension payment is required until the next financial year.

Obtain market valuations of SMSF assets: Evaluate whether it is appropriate to commission a market valuation of key assets such as real estate (the ATO requires these valuations to be conducted at least every 3 years).

Review insurance arrangements

• Review death and disability insurance arrangements for adequacy.
• If these policies are held outside superannuation, consider the benefits of moving.

Update investment strategy of your self-managed superannuation fund: A superannuation fund is under a legal obligation to have an investment strategy.  Failure to have an adequate investment strategy can result in a breach of the law and affect the tax status of the fund.

Consider superannuation reserving to protect volatility to members: A reserving strategy involves applying superannuation profits to a general “reserve” as opposed to a member’s accrued benefits.  The reserve can serve, amongst other things, as a buffer to shield members against potential profit volatility