There is an opportunity for savvy savers over 55 who haven’t quite hit that $500,000 mark in their retirement piggy bank to supercharge your super.
If you’re aged between 55 and 75, sitting on less than half a million in your super, and you haven’t been contributing much extra in recent years, you can make a significant deposit.
Whether you are cashed up from downsizing your home or have received an inheritance, maximising the catch-up concessional (pre-tax) and bring forward non-concessional (after-tax) contributions plus the downsizer contribution could enable super contributions of $897,500.
There is always a catch. However, North Advisory can help you find the way forward. First off, let your super fund know what’s what in writing.
Otherwise, they’ll count your downsizer contribution as part of your regular non-concessional limit, and we don’t want that mess. Also, you must be all over the $27,500 yearly cap on concessional contributions. Anything over that gets tossed into the non-concessional bucket, messing up your plans for maxing out those after-tax top-ups.
Concessional contributions, limited to $27,500 annually, merit attention, encompassing mandatory superannuation allocations.
Individuals earning below $250,000 annually encounter a 15% taxation within the fund for their contributions, contrasting with a 30% contribution tax for those surpassing this income threshold.
Additional concessional contributions, such as salary sacrifice and personal contributions, entitle contributors to tax deductions.
Catch-up concessional contributions, capped at $130,000, enable savers to roll over unused annual caps for up to five years termed catch-up contributions. Eligibility requires a total super balance (TSB) below $500,000 as of June 30 in the preceding year. For instance, a saver with unused contributions could allocate $25,000 for the three years leading to 2021 ($75,000), coupled with two installments of $27,500 for the two years prior ($55,000). The concessional contribution cap stood at $25,000 until June 30, 2021, increasing after that to $27,500. To prevent excess concessional contributions from being categorised as non-concessional top-ups, they may be withdrawn from super, yet they become part of an individual’s taxable income and are subject to taxation at their marginal tax rate, alongside interest.
Non-concessional contributions, set at $110,000 for the current tax year and increasing to $330,000 as of July 1, are subject to an annual cap of $110,000 or four times the concessional limit. An individual may opt to “bring forward” up to three years of contributions by making a lump sum payment of $330,000. The allowance for bring-forward contributions hinges upon an individual’s Total Superannuation Balance (TSB), encompassing both accumulation and retirement phases. Should the TSB on June 30 of the preceding financial year amount to less than $1.68 million, the entire $330,000 may be contributed. Contributions exceeding the concessional cap are taxed at 32%, while amounts surpassing the non-concessional cap incur a top rate of 47%. Individuals aged 75 and above are ineligible to bring forward contributions.
From 55, empty nesters can use the downsizer contribution to top up their super by $300,000 for individuals – and $600,000 for couples – even if their TSB is more than $1.9 million.
Downsizer contributions don’t count towards regular concessional and non-concessional caps. Only $1.9 million can be transferred from the accumulation phase into tax-free retirement income. The balance could be left in the accumulation phase.
The property being sold must have been a primary residence at some point, must have been owned by the claimant for at least ten years, and must be located in Australia; there is also a limit of one-lifetime downsizer contribution to super. The money needs to be transferred into super within 90 days of settlement.
North Advisory ensures individuals maximise their financial positions and grow their wealth.
We have qualified and experienced professionals with specialised superannuation expertise ready to provide the most suitable superannuation strategies for your individual needs.
When you are prepared to make your money work harder for you, contact our team today.
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