The following super changes have been legislated and allow more flexibility to make super contributions.
From 1 July 2018, individuals aged 65 years or over are able to make non-concessional contributions of up to $300,000 (per person) to their superannuation from proceeds of selling their main residences.
These contributions, also referred to as ‘downsizer contributions’, can be made regardless of other restrictions and caps that apply to voluntary super contributions (e.g. age, meeting the work test or the total super balance test).
Downsizer contributions must:
- apply to contracts of sale entered into on or after 1 July 2018
- relate to the sale of a dwelling that was their main residence (wholly or partly) and was owned for at least 10 years before disposal, and
- be made within 90 days of the change of ownership (settlement date), with any extensions to be approved by the Commissioner of Taxation.
Catch-up concessional contributions (CC)
Individuals with super balances less than $500,000 on 30 June of the prior financial year will be able to access a higher annual cap and contribute their remaining unused concessional contribution (CC) cap on a rolling basis for a period of five years.
Only unused amounts accrued from 1 July 2018 can be carried forward. Individuals can use their accrued unused concessional contributions cap space to make catch-up concessional contributions from 1 July 2019.
This measure will enable those who take time out of work or work part-time to make catch-up contributions when they accumulate lumpy income or decide to work full-time.
In addition, an opportunity will exist for those who intend to sell a CGT asset in the future where they can accumulate the amount of unused CCs. They can offset the CGT liability on the sale of the asset by making a personal deductible contribution in the relevant income year that uses up the accumulated unused concessional contribution cap amounts.
Personal Deductible Contribution (PDC)
Since 1 July 2017, individuals eligible to make CCs to super have been able to make personal contributions and claim them as a tax deduction up to the cap of $25,000 pa.
Prior to 1 July 2017, individuals had to meet the 10% test (maximum earnings as an employee condition) to be eligible to make personal deductible contributions (PDCs).
This new arrangement enables people in a range of situations to make PDCs before 30 June 2018 and potentially target the CC cap where it previously was not possible.
Key examples include people who:
- are employed and receive SG contributions that are within the CC cap, but their employer doesn’t offer salary sacrifice arrangements
- switch from being a self-employed contractor to an employee during the course of a year, and
- are residents for tax purposes who are working overseas for a foreign employer and their employer can’t or won’t contribute to an Australian super fund.