Super Snapshot – June 2014

Clear Vision • June 3, 2014

This month we will expand on our age-based super strategies series by discussing the ‘withdrawal and re-contribution strategy’. This strategy is available for SMSF members who are over 60 and is a particularly useful tool for estate planning.

Cheers
Justin

 
Recently we featured a Super Snap Shot article in regards to different types of contributions. Here’s a quick recap:  Concessional contributions are contributions which are made from pre tax money . When you make a concessional contribution to your fund, the fund pays tax on this amount at a rate of 15%. Consequently the contributor (usually your employer or in some instances, you personally) can claim this amount as a deduction. Concessional contributions include: Superannuation Guarantee Contributions (that is, the 9.25% paid by your employer), salary sacrifice contributions and certain types of personal contributions. Non concessional contributions: are contributions made from post tax money . These contributions are not taxed when they are received by the superannuation fund as they have already been taxed in your hands. 

The type of contribution made is very important as this will govern how the money is held in the superannuation fund and ultimately, the taxation treatment when the money is paid out. Concessional contributions (pre tax contributions) will add to your taxable component. Non concessional contributions (post tax contributions) will add to your tax free component.

Example:
Terry is 62 and is the sole member of her superannuation fund. Terry is a widower and has 2 adult children who will receive all of Terry’s superannuation balance when she passes away. Terry works 3 days a week for her company Tex Pty Ltd. Tex Pty Ltd pays Terry an employer contribution of $25,000 in the 2014 financial year. Terry also makes a non concessional (post tax) contribution from her personal money of $5,000. Terry’s $25,000 employer contribution will increase her taxable component, Terry’s $5,000 non concessional contribution will increase her tax free component.

Pension Commencement

Once an income stream has been commenced the proportion of taxable and tax free balance on the start date of the income stream are locked in and will not change for the life of that income stream.  When you begin to draw down on your income stream, the money coming out of the fund is made up of taxable and tax free components in proportion. (e.g. if the Fund has 70% taxable balance, each payment will be made of 70% taxable money).For members over the age of 60, the taxable vs. tax free proportions do not have a direct tax effect as ALL withdrawals are tax free. There is however, an indirect effect and this arises when Terry passes away. Upon death, Terry’s two adult children are non-dependant beneficiaries for tax purposes and therefore are liable to pay tax on the taxable component of Terry’s superannuation balance.

The Withdrawal and Re-Contribution Strategy

Using the withdrawal and re-contribution strategy, Terry’s taxable and tax free balances can be ‘refreshed’ so that her beneficiaries don’t receive an unexpected tax bill with their inheritance. A withdrawal, re-contribution strategy cycles money out of the superannuation fund as a income stream payment and then immediately deposits it back in again as  a non concessional contribution. A new income stream is immediately started on the non concessional contribution on the date of deposit to isolate this money and lock in the 100% tax free status. Because the money is deposited as a non concessional contribution, no tax is payable by the Fund and because the member is over the age of 60 at the time of withdrawal, no tax is payable by the member. In addition, neither party is better or worse off as the money ends up where it started – the benefit will be to any adult beneficiaries of your superannuation benefits when you pass away.

Trustees should note, while the actual process may appear simple enough, throughout this process, care needs to be taken in regards to optimum timing, maximum withdrawal limits, non concessional contribution caps and eligibility to make contributions as well as preparation of new pension documentation. Please do not attempt this strategy without contacting us. Harsh penalties can be imposed by the ATO for exceeding contribution caps or early access to superannuation balances including taxes of up to 93%! We will not only ensure that this strategy is right for your situation but also guide you through the process to ensure everything is conducted in accordance with tax and superannuation legislation.

If you are interested in the above strategy or would like to discuss how your superannuation can work harder for you please contact our office on 07 4688 2500.

 

Payday Super is Coming - 1 July 2026

By Caroline Gillies • March 1, 2026
From 1 July 2026, the Federal Government will introduce one of the most significant changes to superannuation administration in recent years: “Payday Super.” These reforms fundamentally shift how and when employers meet their Superannuation Guarantee (SG) obligations. What’s Changing? Under the new rules, SG contributions must be paid at the same time as salary and wages and received by the employee’s super fund within seven business days of payday. This replaces the current quarterly payment system. The changes apply to all eligible employees, including those captured under the expanded definition of “employee,” and extend to salary sacrifice amounts and other qualifying earnings (QE). Employers will calculate SG at the legislated 12% rate on QE, which includes ordinary time earnings and relevant additional payments. Contributions remain subject to the Maximum Contribution Base, limiting employer liability to approximately $30,000 per employee per financial year. Employers will also be required to report QE and SG liabilities through Single Touch Payroll (STP), enabling the ATO to monitor compliance more closely and identify underpayments earlier. Operational Impact for Employers The shift to payday reporting and payment means payroll systems must be updated to calculate, process, and remit super contributions each pay cycle. Businesses will need to ensure their software can manage QE calculations and facilitate timely electronic payments to super funds. Cash flow management will also require attention, particularly for small businesses accustomed to quarterly payments. Super will become a real-time obligation rather than a periodic liability. Importantly, failure to meet the new deadlines will trigger the revised Superannuation Guarantee Charge (SGC), including penalties and interest. While late contributions and SGC amounts remain tax deductible, interest and penalties do not. Employers currently using the Small Business Superannuation Clearing House must transition to alternative payment solutions before its closure on 30 June 2026. Preparing Now Although implementation begins in 2026, early preparation is essential. Reviewing payroll systems, assessing cash flow impact, and updating internal processes will help ensure a smooth transition and minimise compliance risk. Payday Super represents a move toward greater transparency and timeliness, but it also demands proactive planning from employers. If you would like assistance preparing your business for Payday Super, our team at Clear Vision Accountancy Group is here to help. Please contact us on 4688 2500 to discuss how we can support your transition and ensure you remain compliant. We drew inspiration for this article from the ATO

Don’t be on the ATO’s naughty list in 2026

By Caroline Gillies • December 11, 2025
The ATO is cracking down on people who claim too many tax deductions for properties that they use both personally and as rentals — especially holiday homes. A new draft ruling says that if you use a property for both personal use and renting it out, you must split (apportion) the expenses in a fair and reasonable way. You can only claim deductions for the portion of time or space used to earn rental income. If the ATO thinks your property is really a holiday home — for example, you block out peak times for your own use and only rent it occasionally — they can classify it as a “leisure facility.” If that happens, you cannot claim big expenses like mortgage interest, council rates, land tax or maintenance. You’ll only be allowed to claim small costs like cleaning, advertising and platform/agent fees. The ATO says many owners of holiday homes have been claiming too much by showing “rental losses” every year. They are now looking more closely at cases where the owner keeps the property unavailable for rent during busy periods.  How do I stay off the ATO naughty list? If you mix personal use with rental use, be careful. Only claim the rental part of your expenses, or the ATO may deny most of your deductions.

ATO Small Business Superannuation Clearing House (SBSCH) Closure

By Caroline Gillies • October 17, 2025
From 1 October 2025, the Australian Taxation Office (ATO) officially closed the Small Business Superannuation Clearing House (SBSCH) to new users. Thanks to the efficiencies of Xero, this change does not impact Xero clients, as Xero includes its own built-in auto-super functionality. This means employers can make superannuation payments directly through Xero—without needing to access the ATO’s separate clearing house service. Key Dates and Details No new users: From 1 October 2025, the SBSCH stopped accepting new registrations. Full closure: The SBSCH will be fully decommissioned on 1 July 2026. Existing users: Businesses currently using the SBSCH can continue until 30 June 2026 but are encouraged to transition to an alternative solution before this date. At Clear Vision Accountancy Group, we highly recommend Xero as an efficient, streamlined, and ATO-compliant payroll and superannuation solution. If you’d like to discuss transitioning your business to Xero, call our team today on (07) 4688 2500 — we’re happy to help.