Catch Up Contributions

Catch Up Contributions

Carry-forward (catch-up) super contributions could be the answer for many Australians looking to boost the balance in their super account.

Catch up contributions are concessional (before tax) contributions made to your superfund.

From 1st July 2018, eligible individuals have been able to accumulate unused concessional contributions and carry them forward. From July 1, 2019, you can start making additional concessional contributions to cover those carried-forward amounts.

What are ‘carry-forward contributions’ or ‘catch up contributions’?

Carry-forward contributions allow super fund members to use any of their unused concessional contributions limit (or cap) on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap ($25,000 in both 2018/2019 and 2019/2020), you can carry-forward the unused amount and take advantage of it up to five years later.

Am I eligible?

  • An annual cap of $25,000 applies to concessional contributions (applies in 2018/19 and may be indexed in future years).
  • Your total superfund balance on the previous June 30 must be less than $500,000 for you to be eligible for concessional catch-up contributions
  • If you’re aged between 65 and 74 you will need to meet the work test to make concessional contributions to your superfund (40 hours of paid work in any consecutive 30-day period that financial year).
  • You cannot make voluntary concessional contributions once you reach the age of 75.

Catch Up Contributions: A Case Study

Amy is a 57-year-old earning $100,000 a year.

In 2018/19, she makes total concessional superannuation contributions of $10,000 with a total super balance of less than $500,000 on June 30, 2019.

This means that in 2019/20, she has the ability to make concessional contributions of up to $40,000 into her superannuation fund. Of that, $25,000 is her annual concessional cap and $15,000 is her unused amount from 2018/19, which has been carried forward.

The full $40,000 will be taxed at up to 15 per cent in her superannuation fund.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

Bring-Forward Rule

The Bring-Forward Rule

Have you ever wondered how to contribute large amounts of savings into Super?

Preparing for retirement can be a challenging time and one of those challenges is maximising superannuation balances and getting more money into your super account up until retirement.

One way of achieving this goal is by using the bring-forward rule.

What is the Bring-Forward Rule?

The bring forward rule quite simply refers to non-concessional contributions which are advanced contributions from a three-year period which are contributed in a shorter time frame.

Since 1 July 2017, the annual non-concessional (after tax) contributions cap is $100,000. The bring-forward rules allow you (if you meet all the eligibility criteria), to make non-concessional contributions of up to three times the annual contributions cap in a single year (3 x $100,000 = $300,000 in 2018/2019 or 2019/2020).

This may help you maximise your superannuation balance into retirement.

What do I need to know?

  • Non-concessional contributions are made into your super account from your after-tax income. These contributions are not taxed in your super fund, but the associated investment earnings are taxed at 15%.
  • To make any non-concessional contributions at all, your total superannuation balance must be less than $1.6 million on 30 June of the previous financial year to the one in which you want to make the contribution.
  • If you want to start making a bring-forward contribution in a particular financial year, you must not have already triggered a bring-forward arrangement in the previous two years.
  • If you are aged under 65, you can make non-concessional contributions up to the annual cap ($100,000 in 2018/2019 or 2019/2020) and use the bring-forward rules. You are not required to be working.
  • If you are aged 65 to 74, you can make non-concessional contributions up to the annual contributions cap only if you meet the requirements of the work test (be ‘gainfully employed’ for at least 40 hours in 30 consecutive days during the same financial year in which the contribution is made). You cannot, however, use the bring-forward rules unless you were 64 for some part of the financial year in which you trigger a bring-forward arrangement
  • If you are aged 75 and over, you are generally not permitted to make a non-concessional contribution and so you cannot use the bring-forward rules.

How does a Bring-Forward Arrangement work?

Michael is aged 50 and his total superannuation balance is currently $320,000, but he would like to boost his retirement savings in the years before his planned retirement at 65.

Michael decides to sell an investment property he owns and make a non-concessional contribution into his super account of $300,000 from the proceeds of the sale in August 2018.

As Michael has exceeded his normal annual non-concessional contributions cap of $100,000, he automatically triggers the bring-forward rules by making this large contribution. As he has triggered a bring-forward arrangement, Michael can make no further non-concessional contribution in 2019/2020 or 2020/2021 if he wishes to use up his full $300,000 three-year cap.

In 2021/2022, Michael’s non-concessional contributions cap will reset, and he can make further non-concessional contributions up to the normal annual contributions cap.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

downsizer contributions

Downsizer Contributions

Have you been considering downsizing your home?

Did you know you may be able to contribute this to a more tax effective environment? If you’re 65 or over, you may be able to contribute the proceeds of selling your home into super and be exempt from some of the normal super contribution rules and limits.

What are downsizer contributions?

From 1 July 2018, if you’re aged 65 or older and have owned your house for at least 10 years, you may be able to contribute up to $300,000 ($600,000 per couple) into super from the proceeds of selling your home.

Benefits of Making Downsizer Contributions

Downsizer contributions provide a way to top up your super balance with no work test or age limits applying to downsizer contributions.

The usual annual contributions caps don’t apply to downsizer contributions (Concessional & Non-concessional) which are $25,000 and $100,000 a year respectively and can be made in addition to any concessional and non-concessional super contributions you may be eligible to make.

Downsizer contributions are not subject to the $1.6million total super balance restriction. While you can’t make non-concessional contributions into your super at all if your total super balance is $1.6 million or above as at 30 June of the previous financial year, this rule doesn’t apply to downsizer contributions.

Once you have sold your main residence there is no requirement to buy a new home and finally both members of a couple can take advantage of the downsizer contribution rule, which means up to $600,000 per couple can be contributed toward super.

Am I eligible and other considerations?

  • You must be aged 65 or older to make a downsizer contribution
  • The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time, and you need to have owned the home for at least 10 years
  • The sold property must be in Australia and excludes caravans, mobile homes and houseboats
  • A downsizer contribution must be made within 90 days of receiving the sale proceeds
  • A downsizer contribution form must be submitted to your super fund before, or at the time of making your contribution
  • You can’t have previously made a downsizer contribution to super
  • You can only transfer a maximum of $1.6 million in super savings (not including subsequent earnings) into a tax-free pension account
  • Downsizing your home may impact Age Pension eligibility. There is no special Centrelink means test exemption for making downsizer contributions
  • There are costs involved in selling a property and buying another one which should be considered. You will need to take into account any additional property-related costs
  • Downsizer contributions are not tax deductible.

Downsizer Contributions: A Case Study

Malcolm and Tracy are 73 and 75 years old and retired. They sell their home on 15 September 2019 after owning it for 13 years and receive $1.5 million.

They can both make a non-concessional super contribution of $300,000 ($600,000 in total). They can do this even though Malcolm doesn’t meet the contribution ‘work test’ and Tracy is over age 75.

They can make these contributions regardless of how much they already have in their super accounts and the contributions won’t count towards the non-concessional contributions cap. It does not matter if the house was only owned by one of them.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

Spouse Equalisation Contributions

It is very common for couples to have differing superannuation balances. This is especially if one has been employed in a part-time capacity, temporarily taken time off work to take care of the children or differ in age, occupation and income.

There are some opportunities for couples to equalise their personal superannuation accounts. This helps to ensure they maximise their available retirement savings and income in retirement. This strategy is referred to as a spouse equalisation strategy.

Why should I make Spouse Equalization Contributions?

One of the main reasons a couple would implement an equalisation strategy is due to the transfer balance cap (TBC) that was introduced on July 1, 2017.

The transfer balance cap limits individuals to an allocation of $1.6 million of their superannuation to pension phase. To maximise this tax-free income in retirement a couple could have a combined total of up to $3.2 million, but in reality, this generally differs as one spouse’s balance is closer to the $1.6 million transfer balance cap while their partner may have considerably less inside their superfund.

Spousal equalisation contributions can ensure that a couple maximise the amount they will have in pension phase.

How do I make Spouse Equalization Contributions?

Generally, with this type of scenario the most straightforward way to make an spousal contribution is for the spouse with the larger superfund balance would withdraw a lump sum benefit and recontribute this amount to their spouses superfund as a non-concessional contribution by the receiving spouse. There are a number of superannuation rules that need to be taken into consideration.

Other spousal contribution opportunities are called spousal contribution splitting, allowing one spouse to split up to 85 per cent of concessional contributions made to their superannuation in the previous financial year and request they be transferred, rolled over or allotted to their spouse’s super account.

Things to consider when making Spouse Equalization Contributions:

  • Have you met a condition of release to make a withdrawal from your superfund?
  • The receiving spouse must be either under 65 to receive such a contribution or, if between 65 and 70, satisfy a work test of working 40 hours in 30 consecutive days during the year in which the contribution is made.
  • Non-concessional contributions limits are restricted to $100,000 per annum or a maximum of $300,000 per annum if you apply the bring forward rule – three years’ contributions able to be made if the receiving spouse is under 65 in certain circumstances.
  • If the receiving spouse’s total super balance is greater than $1.6 million, these contributions are not possible.
  • If there is a largely differing age gap between the couple, it is sometimes preferable for the older spouse who will access their superannuation earlier to build up their super account at the expense of the younger spouse in the short term. This enables earlier access to larger amounts of the couple’s super savings. The younger spouse also has more time to address that initial imbalance.
  • In regard to contribution splitting, the receiving spouse must be either under 65 or, if over their preservation age, still gainfully employed.

There are other areas which may need to be taken into consideration and it is always a good idea to seek professional advice from a qualified adviser.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

salary sacrificing

Salary Sacrificing To Super

Salary Sacrificing: A tax effective way to make super contributions

Making voluntary super contributions is a great way to build up your superannuation into retirement, and it could also reduce the amount of tax you pay.

Salary sacrifice is an arrangement between you and your employer with your employer paying some of your pre-tax salary into your superfund which will form part of your concessional contributions. If you earn more than $37,000 a year this is typically a tax effective strategy.

In any given year you can make a concessional contribution to your superfund to the cap of $25,000 p.a. It is important to consider the employer contributions being made to your superfund are 9.5% of your salary and you should confirm that you do not exceed the concessional contribution cap of $25,000.

How does salary sacrificing work

You will need arrange with your employer to direct a portion of your pre-tax salary to your superfund. The benefits of salary sacrificing some of your pre-tax salary into super include:

  • You will pay less tax
  • You will boost your retirement savings
  • Investment earnings in super are concessionally taxed

Things to consider when salary sacrificing: 

  • Your money will be locked away until you reach preservation age and meet a condition of release
  • There are limits on how much you can salary sacrifice into super

Salary Sacrificing: A Case Study

John earns $90,000 before tax, excluding his employer’s super contribution. If he decides to salary sacrifice $10,000 into his superfund, he will save $3,450 in tax.

John’s income Without salary sacrifice With salary sacrifice
Gross salary $90,000 $90,000
Less salary sacrifice to super $0 $10,000
Less tax + Medicare levy $22,067 $18,617
Take home (net) pay $67,933 $61,383
John’s super
Employer super contribution $8,550 $8,550
Plus  salary sacrifice $0 $10,000
Less  contributions tax $1,282 $2,782
Net super contribution $7,268 $15,768

Assumptions: The figures used in this table are estimates only and are based on 2018-19 income tax rates, including the low and middle income tax offset, and a Medicare Levy of 2%. Employer super contributions remain the same after salary sacrifice.

In this scenario, John’s take home pay will drop by $6,550 and will save $1,950 in tax on income and super whilst adding a further $8,500 into super.

Maximise your tax savings and combining it with a transition to retirement pension

If you have met your preservation age and are considering a transition to retirement pension you could maximise your tax savings and potentially maintaining the same take home pay. It is important to note that you will need to meet a condition of release to access your superannuation, hence the importance of seeking financial advice.

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

Making Superannuation Contributions

By making additional super contributions, you can help boost your balance prior to retirement while at the same time potentially lower your marginal tax rate. You can choose whether you want to make concessional or non-concessional contributions, or even a combination of both.

How do I maximise my Super balance to plan for a better retirement?

Maximising your superannuation balance can be done using two types of contributions with both of these contributions types having caps (limits) and different rulings. There are annual caps (limits) on the amount of concessional and non-concessional contributions you can make. If you exceed these limits, you’ll be liable to pay extra tax.

Concessional super contributions

Concessional contributions are made from before-tax income and are taxed at 15% in your super fund. They are currently capped at $25,000 per year, unless you are eligible to use the Carry-Forward Rule. 

  • Compulsory employer superannuation guarantee contributions
  • Salary sacrifice arrangements
  • Any personal super contributions that you claim as a tax deduction

Non-concessional super contributions

Non-concessional contributions are made from after-tax income and are not taxed in your super fund. They are currently capped at $100,000 per year, unless you are eligible to use the Bring-Forward Rule. 

  • Voluntary additional payments made from your take-home pay
  • Any made on behalf of your spouse (married or de facto)
  • A government co-contribution
  • The Low-Income Super Tax Offset (LISTO)

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

Transition To Retirement (TTR)

Have you been considering retirement, but you’re just not sure where to start or if you can afford to retire? 

Your retirement age is not set in stone. Once you’ve met your preservation age, you can choose when and how you’d like to retire. Understanding where you are financially, both now and in the future – whether it be in 5, 10 or 20 years’ time is very important and can set you up for a good retirement.

Would you like to reduce your working hours and supplement your income?

You can access the funds within your Super account as a Transition to Retirement (TTR) Pension even though you are still working. To do this you have to meet the preservation age, which is the minimum age set by the Government at which you can access your Super. Preservation age is dependent on what year you were born.

Date of Birth Preservation Age
Before July 1960 55 years
After June 1960 – Before July 1961 56 years
After June 1962 – Before July 1962 57 years
After June 1962 – Before July 1963 58 years
After June 1963 – Before July 1964 59 years
After 1 July 1964 60 years

Paving the way to retirement

If you’re looking to cut back a little and reduce your work hours from full time to part time, (TTR) Transition to Retirement Pension may be a good option to consider. You can use a TTR Pension to bridge the gap in the reduced income.

EXPLORE THE BENEFITS OF (TTR) TRANSITION TO RETIREMENT

Reduce your work hours while still maintaining your current lifestyle

Access funds in Super to supplement your income

Enjoy the tax benefits while maximizing your contributions
(Super is only taxed at 15%)

How transition to retirement (TTR) works

A TTR Pension gives you access to 4-10% of your Super balance. You can choose how much pension you’d like to withdraw based on your current standard of living. * There are a couple of prerequisites you need to meet when establishing a TTR Pension; you should…

  • Be employed in some capacity
  • Be able to still make contributions to your Super
  • Have met your preservation age, explained in the table above

An important consideration when commencing a TTR Pension is that if you draw down on your Super balance too early in life, it could impact the retirement lifestyle you have later. However, in saying this, you may have the ability to make both concessional and non-concessional contributions to your Super funds.

Financially preparing yourself for the road ahead is always a good idea

By making additional contributions to Super, you can help boost your balance prior to retirement while at the same time potentially lower your marginal tax rate. You can choose whether you want to make concessional (before tax) or non-concessional (after tax) contributions. To learn more about concessional and non-concessional contributions, read our blog post on Making Superannuation Contributions. 

This information has been prepared by IFBA Pty Ltd T/as Pacific Finance Australia ABN 60 108 622 644 Australian Credit Licence No. 391682. Pacific Finance Australia accepts no obligation to correct or update the information or opinions in it. This advice is general and does not take into account your personal objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. 

Secure up to $500k without having to provide financials

Is your business heavily reliant on it’s equipment to run?

Then you’ll know how important it is to invest in quality equipment that will stand the test of time, reduce downtime and improve functionality and efficiency.

Upgrading equipment does not have to be a daunting task

The finance consultants at Pacific Finance can help you secure the funds you need without providing financial statements. We have equipment finance options that give you access to up to $500,000 across a wide range of industries – whether it be transport, machining, earth-moving, agricultural or other industries.

 

What you need to qualify:

  • Have an ABN or ACN a minimum of 12 months
  • Registered for GST
  • BAS for the last quarter
  • 12 months of ATO portals with no history of arrears 

 

Benefits of low doc loans:

  • Your business cashflow remains intact
  • Don’t worry about higher interest rates for low docs loans – the rates are the same as if financials are supplied
  • Multiple lenders and products to choose from
  • Flexible loan terms to suit your financial situation

Let us help you finance the right equipment for your business, so you can focus on growing it to its full potential. Contact one of our financial consultants on 08 9321 2120 or via email – [email protected] for an obligation free quote.

Send us mail

Save money by using energy efficient equipment

If the success of your business is reliant on the efficiency of your machinery, you’ll understand the importance of investing in quality equipment. Investing in the markets’ most innovative equipment can lower your operating costs and bring you savings in energy consumption. If you’re thinking about upgrading your equipment, it may qualify as energy efficient. If so, we can offer you a discount on the interest rate.

Be smart about the debt you acquire

Energy efficient equipment finance is a cost-effective funding solution specifically designed to assist in growing your business. You can save the planet as well as your profit and loss. The finance consultants at Pacific Finance can offer you up to 0.70% off the interest rate for any equipment that qualifies as energy efficient.

 

Secure up to 0.70% off the interest rate for equipment that qualifies as energy efficient

Electric or hybrid cars, busses and trucks

Most European cars

Electric or hybrid engine machinery

Agricultural machinery demonstrating efficient gains

Heavy vehicles powered by natural gas

Replacement machinery demonstrating efficiency improvements

 

Benefits of energy efficient equipment funding

Reduction in applicable interest rate

Finance available for qualifying equipment from $20,000

Finance 100% of the purchase price (including the GST)

Flexible loan structures available – We can help you structure the loan in such a way that the repayments do not include GST and you pay off the GST in one go.

You can potentially use the GST refunded to you by the ATO quarterly to reduce your repayments and save over the term of the loan.

No need to use other assets in your business as security

 

Whether you are upgrading your current vehicle or investing in new machinery – think efficiently!

Securing finance through a dealership might seem like a compelling argument because of the lower headline interest rate. However, the dealerships do not have access to the 0.70% discount, which can make the Broker alternative cheaper. Before you make the decision to go with finance offered at dealerships, you should be fully aware of the pros and cons of both Dealerships and Finance Brokers. You can read more about Dealer Finance vs. Finance Brokers by clicking here Dealer Finance vs. Finance Brokers

Make your equipment work for you

Let us help you finance the right equipment for you, so you can focus on running your business and growing it to its full potential. Contact one of our financial consultants on 08 9321 2120 or via email – [email protected] to see if your equipment qualifies.

 


Make an enquiry now!

commercial finance broking

The value in commercial finance broking

A large successful well-established family business for over 50 years was purchasing property for $4.4 million. They had been with their incumbent Bank for as long as they’d been in business. They had no debt and a squeaky-clean record – a model business and client in every aspect.

The first conversation with their Bank was positive and they were quoted an interest rate of 4.91%.The client then got in touch with a Pacific Finance Commercial Broker who went to the market on the client’s behalf. Pacific Finance was able to secure an interest rate of 3.74%.

The client ended up staying with their bank and were able to get a rate reduction through Broker negotiations. This translated into a $56,160 savings per year and $280,800 in savings over 5 years.

Commercial finance broking

In commercial finance broking, we find that most clients finance facilities can be improved in pricing and more importantly in structuring. Generally the Banks cross-collateralise and take additional security beyond what they otherwise need to. Sometimes and critically, they don’t offer the full range of products that may be required in an optimum strategic portfolio debt stack.

There is a significant advantage in using a commercial finance broker –  Pacific Finance has Brokers who specialise in understanding all business situations and deliver strong outcomes for clients, just like the above example. Facility reviews are relatively easy to do and will not take very long either. Below is a list of the documents we’d use to determine how we might assist a client.

Documents required in the business & personal banking review

  • Business financial report (prepared by your accountant) – Most recent completed profit & loss and balance sheet. For personal reviews – most recent tax return.
  • Management reports – Interim profit & loss for the current financial year, aged accounts receivable and accounts payable.
  • Commitments schedule – Equipment (other than term loans)
  • Loan schedule – Any term loans including your home mortgages with most recent bank statements, specific loan terms and covenants such as security
  • Directors – Personal statement of position
  • ATO – Current portal reports for integrated client account and income tax account
  • Future needs – Succession, expansion, etc.

Let us negotiate on your behalf to help you secure better interest rates. Contact your Pacific Finance Australia Broker on 08 9321 2120 or send us an email for more information – [email protected]