The most common question advisers are asking in the lead-up to the close of the financial year is what size contribution a client can make to their superannuation fund, according to a BT technical consultant, who said their first question should focus on eligibility instead.
Speaking during a webinar today, Michael Tran said more planners were seeking advice from the BT technical hotline on how to figure out a client’s contribution capacity, but this question could be simplified by identifying the issues of eligibility and concessional contribution caps separately.
“Sometimes it can be confusing when you try to work out someone’s cap at the same time as their eligibility to contribute. These are two separate concepts and I find that it’s much easier to separate the two and think about them independently,” Tran said.
“You should first determine if your client can contribute at all. If you work out that they can’t contribute, there is no point in working out what their cap is; they simply cannot contribute.”
In accordance with the current law, he noted the work test only applied to those 67 years and older, and those 66 years and above are able to make downsizer contributions, with both factors having an impact on the eligibility to make contributions into a superannuation account.
He provided an example where he identified eligibility factors first to simplify the process of determining what contributions caps might apply.
“As an example, if we have someone who is 68 and they don’t meet the work test or they don’t meet the work test exemption, they are unable to contribute to make any concessional or non-concessional contribution. There is no point in working out their cap,” he said.
He noted unused caps from 2018/19 onwards can be used in 2021/22 if the total super balance is under $500,000 on 30 June 2021.
In addition, the technical consultant said work test eligibility could change, as announced in the federal budget in May, with legislation due to be debated in parliament this week.