The lead up to 30 June 2023 provides an opportunity to revisit your TSB as at 30 June 2022 to re-evaluate whether you are entitled to make certain contributions in the 2022/23 tax year.
Despite what your TSB may be today, based on your 30 June 2022 balance you may have an opportunity to:
• Make non concessional contributions (NCCs) – Requires your 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 – if you were under the age of 75 on 1 July 2022, you may be eligible to make up to $330,000 of NCCs if your TSB was under $1.48m, or $220,000 if your 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, your TSB must be less than $500,000.
• Make personal deductible contributions using the one-off work test exemption – To be eligible, your TSB must be less than $300,000.
Superannuation contributions made on or before 30 June 2023 will impact your 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).
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.
Re-contribution strategy
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 client’s TSB as at 30 June.
Reversionary beneficiary
For an individual in receipt of a pension, which automatically reverted to them during 2022/23 upon the death of another member, 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.
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