Here’s what you need to know to about changes to your responsibilities, and how to support employees in growing their super.
Key changes this year
Tax deductions on personal super contributions
This is the first financial year employees can claim a tax deduction for their personal super contributions following changes from the government which came into effect 1 July 2017.
If they make a personal super contribution before the end of the financial year, your employees can now claim a personal tax deduction for the amount of the contribution in their tax return, resulting in a reduction in their taxable income for the year. This excludes any employer contributions and/or salary sacrifice contributions.
As personal super contributions will only be taxed at 15% (provided the employee earns under $250,000), this produces broadly the same tax benefit offered by salary sacrificing from before-tax dollars.
This incentive is available to employees who make a personal super contribution and are aged between 18 and 75. Employees 65 and over need to satisfy work test requirements to qualify.
Any personal contributions claimed as a tax deduction will count towards the $25,000 concessional contribution cap.
Employees who earn less than $51,813 for the 2017/18 financial year could get up to $500 from the government to boost their super savings.
The superannuation co-contribution scheme is a government initiative to help low to middle income earners build their super balances.
To be eligible, employees must earn less than the threshold amount and be aged under 71 for the 2017/18 financial year. They must also make a personal non-concessional (after tax) contribution to their super fund by 30 June 2018 and lodge an income tax return for that financial year.
The information in their tax return will then be used to determine the co-contribution amount they’re entitled to.
If your employees have spouses who are low-income earners or who aren’t currently working, they could consider making an after-tax contribution to their partner’s super.
Contributing to their partner’s super via after-tax contributions would allow your employee to claim an 18% tax offset on contributions up to $3,000, up to a maximum of $540 this financial year.
To be eligible, the receiving spouse needs to be aged under 65, or if they are between 65 and 69 (inclusive) they must pass a work test. Their income must be $37,000 or less to qualify for the full tax offset and less than $40,000 to receive a partial tax offset. Both partners must also be Australian residents.
What else is changing in the new financial year
Following the measures announced in the 2017 Federal Budget, this new financial year will provide employees with additional opportunities to boost their super.
Tax concession for first home buyers
Putting money in the bank is not the only way your employees can save for that first home deposit.
To help young Australians save for their first home, eligible home savers will be able to save for a deposit inside super under the First Home Super Saver Scheme (FHSSS).
Voluntary super contributions made since 1 July 2017 (along with associated investment earnings) up to $15,000 per year, will be able to be withdrawn as of 1 July 2018 and put towards a first home deposit.
If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for singles and $60,000 for couples.
‘Catch-up’ concessional contributions
From 1 July 2018, individuals with super balances of $500,000 or less at the end of the preceding financial year will be able to carry forward any unused concessional cap amounts for the next five financial years. Unused concessional cap amounts from 2018-19 can then be used in 2019-20 (provided other conditions are also met).
This will allow employees with low to medium super balances to boost it where they can or if they come into extra money, for example, through an inheritance.
Know your super responsibilities
As an employer you have a responsibility to understand the requirements regarding superannuation payments you make on behalf of employees. There are penalties for not complying with the government’s rules on super, so it’s a good idea to understand your roles and responsibilities in advance. Here’s what you need to know.
As the ATO has recently taken a tougher stance on non-compliance with Super Guarantee contributions, it’s important to fulfil your super responsibilities to avoid penalties later down the track.
Single touch payroll
From 1 July 2018, Australian businesses with 20 employees or more will make the transition to single payroll reporting. For businesses with under 20 employees, the transition will be optional after 1 July 2019.
This more streamlined way of reporting means that when you complete your payroll, payments such as salaries and wages, pay as you go (PAYG), withholding and super information will be sent to the ATO directly from your payroll solution.
We’re here to help
To find out how these changes affect your employees, encourage them to speak to their financial adviser. If they’d like help finding one, they can call AMP on 131 267 or you can point them to our find an adviser tool.
Paying employees’ superannuation requires the collection, maintenance and use of sensitive information. Here’s a timely reminder of your responsibilities as an employer.