Heffron outlines key contribution strategies for next financial year
With the contribution caps now set for the 2023–24 income year, SMSF professionals can do some forward planning.
In a recent article, Heffron head of SMSF technical & education Lyn Formica noted that the figures from the Australian Bureau of Statistics (ABS) from the December 2022 quarter weren’t quite high enough for the concessional contributions cap to be indexed from $27,500 to $30,000.
“This means, subject to any changes in the federal budget in May, the concessional cap will remain at $27,500 in 2023–24,” she said.
“It also means the non-concessional contributions cap for 2023–24 will remain at $110,000.
“Combined with the general transfer balance cap increasing to $1.9 million on 1 July 2023, that’s the final piece of information we needed to calculate the non-concessional contribution bring forward thresholds in 2023–24.”
Next year those with less than $1.68 million in superannuation will be able to contribute $330,000, those with balances between $1.68 to $1.79 million can add $220,000, and for clients with between $1.79 to $1.9 million the bring forward amount will be $110,000.
Ms Formica said the increase in these thresholds provides some important planning opportunities for those wanting to maximise their contributions to super in the next few years.
“For example, I met with Jeff last week. He’s 68, retired and wanting to minimise any tax which might be payable when his adult financially independent children inherit his super on his death,” she said.
“I had hoped the 1 July 2022 removal of the work test for non-concessional contributions would have opened up the opportunity for a withdrawal and recontribution strategy for Jeff.
“Unfortunately, his total superannuation balance at 30 June 2022 was $1.72m, which means his non-concessional contributions cap in the current year is nil. So, there’s no avenue for a withdrawal and recontribution strategy for him in the current year.
“But, if his total super balance is less than $1.9m at 30 June 2023, he’ll have a non-concessional contributions cap of at least $110,000 in 2023–24. So, a withdrawal and recontribution strategy is back on the table for 2023–24.
“Depending on his likely balance at 30 June 2023, it might even be worth Jeff taking a small withdrawal from super before 30 June to ensure his balance remains under $1.79m and increase his non-concessional contributions cap to $220,000 in 2023–24.”
And despite the government’s proposed changes to superannuation, Ms Formica said it is still a good idea to proceed with the forecast plan.
“The Government’s proposals are just that – proposals. They still need to be legislated and there’ll be another federal election before the proposed start date of 1 July 2025,” she said.
“As Jeff has reached age 65, his super is fully accessible to him, even any new contributions he might make. Which means he’ll have the opportunity to change tack and withdraw money from super if that’s the preferred course of action in the future.
“And if he doesn’t take advantage of the opportunity to employ strategies like this in 2023–24, he may find his super balance has grown so high that strategies like this aren’t available to him in the foreseeable future.”
