Lump Sum Contributions into Superannuation:

For any number of reasons you may wish to make a lump sum contribution into your superannuation and considered, holistic legal advice should be sought in this regard. There are various sources of superannuation contributions such as employers and their associates, members and their spouses, payments of the superannuation guarantee shortfall and Government co-contributions by the Commissioner of Taxation. The tax treatment of lump sum contributions should be thoroughly analysed to ensure that taxation liability is minimised and that any concessions available are taken advantage of.

Generally, contributions are not normally regarded as ordinary income of the fund under the income tax law, as they are essentially receipts of capital. Thus there are various tax concessions available for contributions. Tax-deductible contributions are taxable in the hands of the fund (at 15%), while non-deductible contributions, rebatable contributions and government co-contributions are not taxed in the fund. This allows the contributions to be included in assessable income for that year of income and be subject to tax in the hands of the fund (at 15% for a complying fund). Subject to certain additions and exceptions as discussed below, the three types of assessable contributions of a superannuation fund are contributions made by someone other than the receiving member (for instance an employer) but not including spouse contributions or a roll-over superannuation benefit, contributions made on the member on his or her own behalf for which a tax deduction will be claimed, and amounts transferred from a foreign superannuation fund to an Australian superannuation fund (i.e. the SMSF), where an election is made for the transferred amount to be taxed in the fund. Thorough and detailed advice from a qualified and experienced Taxation Lawyer can be greatly advantageous in timing and structuring your contributions.

Furthermore, there are annual limits or caps which apply on superannuation contributions made for or by an individual person and excess contributions tax could be imposed for contributions exceeding the caps in each year. Generally there has been no limit to the amount of superannuation contributions that employers can make on behalf of their employees in a particular year and a deduction may be allowed for all of those contributions if certain conditions are met. The self-employed are also entitled to make unlimited deductible contributions as long as they satisfy the deduction conditions. These conditions include that the superannuation fund must be a complying superannuation fund, the contributor must satisfy the 10% rule, age-related conditions and notice requirements. Sound financial and legal advice from a skilled Taxation Lawyer may also hugely beneficial to ensure you have a thorough understanding and pragmatic approach to your superannuation contributions.

If you are making a lump sum contribution it is important to note the difference between concessional and non-concessional contributions. Concessional contributions are contributions made in the financial year to a complying superannuation plan by or for an individual that are included in the assessable income of the superannuation fund. These contributions can be made by your employer, yourself personally, transferred from a foreign superannuation fund or a rollover from a complying superannuation fund or RSA.  Non-concessional contributions are generally contributions made to a complying superannuation plan in respect of the individual that are not included in the assessable income of the fund. These are generally undeducted contributions from after-tax income and may be taxed at comparatively high rates. Proper legal advice with respect of lump sum contributions by a Taxation Lawyer may be beneficial to ensure an effective and compliant contribution strategy is devised.

If you would like further information or wish to discuss your superannuation contribution matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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