EOFY and your superannuation

These contributions are classified as employer contributions and taxed in the super fund at a maximum rate of 15%, rather than your marginal tax rate. It’s important to calculate your sacrifice correctly to make sure you don’t exceed the annual contribution cap.

Your taxable income is calculated once your salary sacrifice has been deducted from your gross income. By deducting your additional contributions in this manner, you could achieve a significant personal tax saving.

For any additional contributions, timing is critical, Cayle says,

“It is definitely worthwhile considering whether you have the ability to add some money to your super in order to help reduce your tax obligations. But time is running out this year… you have to make sure any additional contributions are processed before 30 June.

Super clearing houses tend to get extremely busy during the last few weeks of June, so the sooner you can process the transaction, the better.”

If you fail to draw down the minimum, then your super reverts back to the accumulation phase… and that is taxable, so you would be taxed on any income that the fund generates. Once you commence the pension phase, it’s important to keep it going to enjoy the tax-free status of the super fund.

However, this year there have been some changes… the government has temporarily reduced superannuation minimum drawdown requirements for account-based pensions by 50%. This is effective for both the 2019/20 financial year and the 2020/21 year.

This is particularly helpful during the current market downturn… right now if you had to sell assets to raise the cash for your pension drawdown, you’d potentially be selling at a loss. By reducing the pension factor by 50%, the government has helped to minimise people being put in a forced sell situation.”