The lead up to 30 June 2023 provides an opportunity to revisit a member’s TSB as at 30 June 2022 to re-evaluate whether you are entitled to make certain contributions in 2022/23. Despite what a member’s TSB may be today, based on their 30 June 2022 balance they may have an opportunity to:
- Make non concessional contributions (NCCs) – Requires the member’s TSB to be less than $1.7m to avoid triggering an excess NCC.
- Make spouse contributions – These contributions are treated as NCCs and require the receiving spouse’s TSB to be less than $1.7m.
- Access the bring forward NCC rules – Members under the age of 75 on 1 July 2022, may be eligible to make up to $330,000 of NCCs if their TSB was under $1.48m, or $220,000 if their TSB was greater than or equal to $1.48m but less than $1.59m.
- Access unused concessional contributions (CCs) – To be eligible to use catch-up CCs, a member’s TSB must be less than $500,000.
- Make personal deductible contributions using the one-off work test exemption – To be eligible, a member’s TSB must be less than $300,000.
Superannuation contributions made on or before 30 June 2023 will impact a member’s TSB as at 30 June 2023. It is, therefore, important to consider the impact that these contributions may have in subsequent years, especially as the bring forward contribution thresholds are set to change on 1 July 2023 with the indexation of the general Transfer Balance Cap (TBC). We explore later in this bulletin the impact of an increased TBC on the bring-forward NCC rules.
When planning for future contributions, it is important to also consider TSB as at 30 June 2023, to maximise contribution opportunities in 2023/24.
TSB planning is more important than ever following the Government’s proposal to introduce an extra 15% tax on earnings for members with a TSB exceeding $3m. This new $3m super cap has revived some long-standing strategies, especially in relation to spouse equalisation. These include:
- Splitting contributions with a spouse
- Exploring opportunities to take a lump sum benefit and re-contribute for a spouse
- Taking maximum pension amounts or lump sum withdrawals from pension accounts.
While re-contribution strategies have been around for many years, they have been re-enlivened with the relaxation of the contribution rules on 1 July 2022.
Based on an ATO media release dating back to 2004 (NAT 04/058), the industry view is that a simple re-contribution strategy is unlikely to attract the anti-avoidance provisions. This is despite the ability to change the tax components of a member’s superannuation interest which may ultimately lead to lower amounts of tax being paid when the member dies, and a death benefit is paid to a non-tax dependant.
Recognising that this ATO view predates the TBC and TSB regimes, it is important to tread cautiously – particularly if you are considering more aggressive applications of this strategy such as using a recontribution strategy multiple times to manage your TSB as at 30 June.
For an individual in receipt of a pension, which automatically reverted to them during 2022/23, it is important to recognise that any impact on their Transfer Balance Account (TBA) will be deferred for 12 months.
However, as the deceased’s pension automatically reverted to them on death, the value of the pension will be counted towards the beneficiary’s TSB on 30 June 2023.
As such, the current financial year may be the last opportunity for impacted members to contribute more capital to super, based on their lower TSB as at 30 June 2022.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.