Question 1

I am 64 and want to deposit 100k into my super, which is in accumulation as an after-tax contribution. If I want to claim it on my tax, I will have to pay 15k to deposit it into my super? How much will I get if I claim it on my tax? Or is it better financially to just not claim it?

When making an after-tax super contribution (not salary sacrifice), you have the option to claim all or some of that contribution as a tax deduction in your income tax return.

If you do claim a tax deduction it counts under the ‘concessional cap’, just like salary sacrifice and employer SG contributions do.

The standard annual concessional cap is $30,000 but if you have a total super balance below $500,000 (based on your balances on June 30 of the previous financial year) you can have a higher concessional cap based on the carry-forward contribution rules, which I covered recently.

So firstly, don’t exceed your concessional cap.

If you do intend to claim a tax deduction on the contribution you need to advise your super fund.

Super funds have their own form or you can use the ATO version to send to your fund.

And don’t forget to claim it in your tax return.

Your super fund will then deduct tax of 15 per cent on this amount and send it off to the ATO.

How much income tax benefit you receive is then dependant on your overall income and marginal tax rate.

Let’s look at an example and assume you earn $100,000 and are on a marginal tax rate, including Medicare, of 32 per cent. This now covers everyone earning between $45,000 and $135,000.

Assume you claim $25,000 tax-deductible contribution to super.

This is the result:

• You pay (via your super fund) 15 per cent in contributions tax = $3750
• You receive a benefit (via your income tax return) of $8000 ($25,000 x 32 per cent)
• Your NET benefit is therefore $4250 ($8000 less $3750).

Now that is a pretty good tax savings.

It’s even better for those on a higher marginal tax rate.

It’s also worth noting that salary sacrifice works in exactly the same way tax-wise.

But instead of you having to claim a tax deduction, the employer deducts this from your salary first and informs the tax office.

Question 2

Hi Craig. A few years ago, I started a TTR with my super with the intention of retiring early. I am now 63 and am on long service leave with the intention of giving my notice at the end of it, and then living on my TTR pension until I reach retiring age. What I want to know is, do I have to roll my super over to my TTR or can I leave it in super and is there any implications with Centrelink? Thanks for your help.

You can leave your super as is, or start a pension with it.

Note that with your TTR pension, once you retire you can then convert it to a regular pension. This has two benefits:

• This removes the maximum drawdown limit (which for TTR pension is 10 per cent per annum).
• All internal earnings then become tax free. This is as opposed to a 15 per cent tax earnings for super accumulation and TTR pensions.

Concerning Centrelink, I assume you won’t be eligible for any benefits until you attain age pension age. At this point all superannuation funds, whether in pension or not, will be assessed.

Question 3

Craig, thanks for your helpful advice. I note that non-concessional contributions can be made to an accumulation account up until the age of 75. If I make a contribution at age 75, can I contribute up to the three-year bring-forward rules?

So long as you are under the age of 75 anytime during the financial year, you can use the three-year bring forward and contribute up to $360,000 as an after-tax, non-concessional contribution.

However, you must make this contribution no later than 28 days after the end of the month in which you turn age 75.

If you don’t make the contribution before then, you won’t be able to make any non-concessional contributions.

Note, if your total super balance is above $1.66 million then this will restrict how much you can contribute.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

– TND