Timing your superannuation contribution prior to 30th June is important If you are considering a tax deduction. This applies to both employers paying SGC for employees as well as taxpayers wanting to make a personal contribution. Knowing how much you can contribute also needs to be considered.
Employers using a Clearing House
Superannuation contributions are not tax deductible until they have been received by the superannuation fund. Therefore, just paying the employees Superannuation Guarantee Contributions and salary sacrifice amounts to the Small Business Superannuation Clearing House (SBSCH) on 30th June 2020, will not give you a deduction for this payment in this current financial year. The deduction will occur in the following financial year, that is 2020/21.
To ensure you can claim a deduction for the 2019-20 income year, you need to allow processing time for your superannuation payments to be received by clearing house and then onto the employee's superannuation fund. Therefore, superannuation payments should be received by the SBSCH by 23rd June 2020. If you are using Xero for the batch superannuation payments, they are advising that the batches must be approved in Xero payroll by the 24th June 2020.
However, if you do not require a tax deduction for these payments in 2019/20, the quarterly Superannuation Guarantee payments are due on 28th July 2020. If you are using Xero for the batch superannuation payments, they are advising that the batches must be approved in Xero payroll by the 21st July 2020.
Similar to above, any personal contributions made must be received by the superannuation fund before 30th June 2020 in order to claim a deduction. If the contribution is received by the fund on 1st July, the deduction will be allowed in the next financial year, not now. Therefore, plan to make any contributions around 24th June 2020 to ensure the superannuation fund has received the funds.
How much can I contribute in 2019/20?
The general rule is that the concessional contribution cap for superannuation you can claim a deduction for is $25,000. This includes any SGC and salary sacrifice contributions made by your employer as well as personal contributions.
However, for the 2019/20 year it may be possible to contribute more into superannuation. This scheme is called “Unused Concessional Cap Carry Forward". If you have a superannuation balance of less than $500,000 commencing in the prior year, you may be entitled to contribute more than $25,000 by also contributing any unused cap from the prior year. For example, the prior years cap was $25,000. If only $15,000 was contributed in 2018/19 financial year to superannuation, you could contribute $35,000 in 2019/20 ($25,000 + $10,000 for prior year). Any unused contributions can be carried forward for a maximum of five years. Therefore, in the 2020/21 financial year, you could contribute $25,000 plus any unused amounts for the prior 2 years and so on.
If you are unsure of the amount you can contribute, please contact us to discuss.