Can I make contributions to my SMSF as if I am 65 during the financial year 2014-15?
You can start contributing to your super after you turn 65 as long as you worked 40 hours within a 30-day period during the financial year wherein you want to make a contribution. Assuming that you did not retire in December 2014, it’s safe to assume that you met the above work test within the first half of the financial year and you are entitled to contribute to your super fund until June 30 within the same year. But in the financial year 2015-16, you will need to meet the work test before you make any contributions.
But note that if you’re retired, you can make a personal/deductible contribution or in SMSF jargon a concessional contribution before June 30. This is useful if, by the time you retire, you have a number of accrued leave that could boost your annual taxable income. Take note that you can only make a total of $35,000 in concessional distribution for the financial year of 2014-15. This total includes all employer contributions and any salary-sacrificed contribution made earlier during the year.
Because you just turned 65, you are limited to the standard $180,000 cap for non-concessional contributions and you cannot use the three year roll-up.
Has the tax offset of $500 for a mature age worker (someone over the age of 50) has been abolished or amended in the last budget?
The bill that abolished the mature age worker tax offset for the financial year 2014-15 and in the later financial years, dubbed as the Tax and Superannuation Laws Amendment (2014 Measures No.5) Bill 2014, passed the Parliament and both houses on March 3, and as of March 2015, the bill is awaiting Royal assent.
Can I withdraw the money in my retirement accounts 401(k) and 403(b) and transfer it to my UniSuper accumulation superannuation account without worrying about tax implications and the 10 per cent penalty? Are there tax implications for the transfer and does the USA and Australia have tax treaties that can make this possible?
A 401(k) account is an SMSF where an employer can make pre-tax contributions and a 403(b) plan is another form of SMSF that’s available for certain public-school employees or employees of tax-exempt organizations. The latter can be in the form of tax-deferred annuity and can be held by a retirement account custodian and invested in mutual funds. The latter can also be a retirement income account that’s invested in annuities or mutual funds.
For both, there are rules about when money can be withdrawn and penalties when you withdraw prior to retirement age. A US resident pays standard income tax on withdrawal after the age of 59.5 (59 years and 6 months).
Assuming that you gave up US residency, you will be subject to a withholding tax on withdrawal as a lump sum, which is around 15 per cent under the US-Australia tax treaty but you may want to get in touch with the Internal Revenue Service and complete form W-8BEN.
You can get an exemption from this tax under the dual tax treaty if you withdraw a pension from your funds, but I suggest you get a ruling from the IRS first before making any decisions as to whether you withdraw it as a lump-sum or have it paid as pension. You will also find state charges because a pension is likely to be taxed in Australia. But you can apply the $18,200 tax-free general concession, assuming that your other income comes from untaxed super benefits.
