Many business owners and salaried individuals are considering concessional superannuation contributions before 30 June. Beware the risk of last-minute transfer of funds to superannuation, the day the dollar hits the superannuation bank account is what matters for tax deductible contributions this year.
At this time of year, business owners around the country are considering their potential profit position for the 2013/14 financial year. Many may be deciding whether to swap paying between 30% company tax or 46.5% tax where salaried or self-employed, by redirecting their profits into superannuation as concessionally taxed contributions, where the tax rate is only 15%. The tax saving for self employed persons or salaried directors can be as high as 46.5% - 15% = 31.5%.
One potential trap is the risk of a contribution not being considered 'tax-deductible' in the 2013/14 financial year due to a last-minute transfer of funds.
As mentioned in our Year End Tax and Superannuation Planning Guide in May 2014, a superannuation contribution is tax-deductible to the employer in the year that it is physically received by the superannuation fund, not when a cheque payment is mailed or a contribution is electronically transferred. There can be several day delays between an employer performing an electronic transfer or writing a cheque to the time that it is credited by a superannuation fund to their own bank account.
Avoid the unintentional consequence of pushing out the superannuation contribution into July by making your superannuation payments well before Monday 30 June 2014 to allow sufficient time for them to be receipted by the receiving superannuation fund. Failure to do this could very well result in your tax deduction being applied to the 2014/15 financial year, and against your personal concessional contribution cap for that later year as well.
If you have any questions about the timing of making Superannuation payments on behalf of employees or directors, please contact Hanrick Curran's Superannuation specialists, Chris Campbell and Clive Todd on 07 3218 3900.