Speaking in a recent podcast, Colonial First State head of technical services Craig Day explained that market volatility in recent times has impacted the superannuation balances of many clients across the super landscape.
“As a result, the value of many people’s total super balance may actually be lower this year than it was last year,” said Mr Day.
“This means they may now be able to access certain super concessions or have a higher non-concessional cap for this financial year compared to the previous year.”
Speaking in the same podcast, CFS senior technical analyst Alex Denham explained that the total super balance is only measured on one day of the year, 30 June.
“That value is then used to determine eligibility for a range of concessions for the following financial year,” said Ms Denham.
“So the value of a person’s total super balance on 30 June 2022 will determine their eligibility for certain things in the 2022–23 financial year.”
CFS senior technical manager Tim Sanderson said the total super balance can impact an individual’s ability to access the non-concessional cap as the TSB must be below $1.7 million.
“It can also impact access to the bring-forward rule. In order to access the three-year bring-forward rule, the total super balance must be less than $1.48 million.”
In order to be able to make carry forward contributions, the TSB must be below $500,000, Mr Sanderson said.
“It must be less than $1.7 million to get a government co contribution or for your spouse received the spouse contribution tax offset and less than $300,000 to qualify for the work test exemption.”
The TSB also needs to be $1.6 million or less for an SMSF to be able to use the segregated asset method to calculate its exempt current pension income.
Mr Day gave an example of a client with a $10,000 unused concessional cap amount from the 2018–19 financial year.
“On 30 June 2021 there total super balance was $520,000 so they wouldn’t have been able to apply that amount in the 2021–22 year in order to make a concessional contribution of $37,500.”
“If we fast-forward to 30 June 2022 and the client has been smashed by market volatility and perhaps their super balance has decreased to $490,000 at 30 June 2022, they become eligible again.”
This means they can then use that $10,000 unused cap amount from the previous year and make a $37,500 contribution in the 2022–23 financial year, he added.
Mr Day said given there are around seven different thresholds involving the total super balance, it’s unsurprising that industry associations are calling for some alignment and simplification with these thresholds.
“The threshold for the work test exemption for example could be the same at the one for carry forward concessional contributions.”
“We’ll have to wait and see if that gets adopted or falls on deaf ears.”
