Contribution Deadlines to ensure a Tax Deduction for 2020/21

We remind employers that superannuation contributions are only considered to have been paid for the purpose of claiming a tax deduction once they have been received by the super fund.  If you wish to claim a tax deduction for your contributions in the 2020/21 financial year, payments must be received by employer super funds by 30 June.

To meet this deadline, payments will need to be made well in advance to allow processing time, particularly if there is a clearing house involved.  The ATO Small Business Superannuation Clearing House recently announced that they must accept payments on or before 23 June 2021 to ensure payments reach super funds on time.  Please note, our QBO clients using Beam must have their super payment successfully uploaded by 3.30pm on 23 June.

Super Guarantee Rate Rising from 1 July 2021

The super guarantee rate will rise from 9.5% to 10% on 1 July 2021, so businesses with employees will need to ensure their payroll and accounting systems are updated to incorporate the increase to the super rate.

It is important for employers to note that the new 10% rate will apply to ordinary times earnings paid after 30 June, irrespective of when those amounts accrued.  Accordingly, payroll paid on or after 1st July will incur the 10% rate, even if some of the payroll period relates to the month of June.

Employers should also be aware that the increasing super guarantee rate has implications for employees remunerated through a superannuation inclusive package.  In the absence of a remuneration review, an employee’s take home payments will likely reduce from 1 July.  In this instance, employers should communicate with employees as early as possible.  Alternatively, employers may consider implementing a pay increase to ensure consistency in employee take-home payments.

Super Contribution Caps will Increase from 1 July 2021

The ATO has confirmed that, from 1 July 2021, the superannuation concessional and non-concessional contribution caps will be indexed.  The new caps for the 2021/22 year will be:

¨ Concessional Cap:  $27,500

¨ Non-Concessional cap:  $110,000 (or $330,000 over 3 years)

The total superannuation balance limit that determines if an individual has a non-concessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021.

As we approach a new financial year it will be important, particularly given the increasing super guarantee rate, for clients to review their arrangements to ensure contribution caps are not exceeded.

Temporary Reduction in Pension Drawdown Rates Extended

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022. As part of the response to the coronavirus pandemic, the Government reduced the superannuation minimum drawdown rates by 50% for the 2019/20 and 2020/21 income years.  This 50% reduction will now be extended to the 2021/22 income year.