Natalie Scott, superannuation adviser for Accurium, said in a recent webinar that clients could also consider the carry forward unused concessional contributions, and the impact of the increase to the general TBC on the bring forward rules.
“As the transfer balance cap has increased to $2 million, if you’re looking at members making a non-concessional contribution for the following financial year, on 30 June 2025 if their balance is below $2 million they can make a non-concessional contribution,” Scott said.
“They still need to be under 75 but it does open up the rules to some of your clients that weren’t able to do so before in the last financial year. What is interesting, and a lot of people aren’t aware of, is reserving and the impact on Division 293 tax which is an extra 15 per cent tax on concessional contributions above $250,000.”
Scott said if clients are in this scenario, this is a way to perhaps reduce their threshold below $250,000 to avoid paying Div 293 tax on the dividends.
“For example, we have a client, Richard, who has an assessable income of $275,000 in the 2025 financial year. He’s already put in a $30,000 contribution and is looking at putting in another $30,000 contribution in June 2025.”
“Effectively, what he’s doing is he’s getting a $60,000 deduction for the 2025 financial year, and that reduces his income down to below $240,000 which means he doesn’t have to pay Div 293 tax on the $60,000.”
This is because while the $30,000 is added back when looking at the tax income amount, the amount that will be allocated in the next financial year is not added back, as it’s not considered part of the Div 293 income calculation and will count to the income for the 2026 financial year.
“However, you should also be aware that could create a problem in the next financial year, so it really only works if you’ve got a client who’s in the scenario that has had a really good financial year and might have disposed of a capital asset,” Scott said.
“[This strategy] might help them reduce that down and not have to pay Div 293 tax on those contributions.”
Scott warned that reserving is “not a walk in the park” and the correct documentation needs to be in place before 30 June.
“The client should really have an SOA in place as well, so make sure that they’re aware of that as it can trigger a request for excess and additional information from the ATO. When you use a contribution reserve, you need to lodge an ATO document called a request to adjust contributions.”
