Category: Small Business Tax

If you have a superannuation account, there’s a reasonable chance you also hold life insurance through it – possibly without realising. Almost 10 million superannuation accounts have insurance attached to them, yet many members can’t say what they’re covered for, how much it costs or whether it actually suits their needs. Before assuming your default cover has you sorted, it’s worth unpacking some common misconceptions.

Misconception 1: “Everyone gets cover automatically”
Insurance through super doesn’t start automatically if you’re a new member aged under 25 or your balance is under $6,000, unless you contact your fund and ask for it, or you work in a dangerous job where your fund gives you automatic cover. If you’re younger or just starting out, you may have no safety net at all unless you opt in.

Misconception 2: “Default cover will be enough”
Default cover is a starting point, not a tailored solution. In particular: default cover may be lower than, or different from, cover available outside super; eligibility rules and exclusions can apply; and cover can stop if your account becomes inactive, your balance is too low, you change funds (unless arrangements are made to transfer or replace it) or you reach an age limit. When reviewing your insurance, check whether there are exclusions or whether you’re paying a loading – this is a percentage increase on the standard premium charged to higher-risk people such as those with a high-risk job, a pre-existing medical condition, or those classified as smokers. If your fund has classified you incorrectly, you may be paying more than necessary.

Misconception 3: “My cover follows me when I switch funds”
Often, cover won’t follow you. If you switch superannuation funds, your insurance policy may not be portable, meaning the cover you had can lapse once you’re no longer a member. Some funds allow you to transfer your policy to personal ownership, but this may require health checks and the insurer could charge more to continue the cover. Consolidating accounts can also unintentionally cancel valuable cover, so always check before you act.

Misconception 4: “If I stop contributing, nothing changes”
Cover can change if your account isn’t active. By law, super funds cancel insurance on accounts with no contributions for at least 16 months. Some funds have their own rules and cancel insurance if your balance is too low. Your fund will typically attempt to notify you before changes happen, so it’s important to keep your contact details updated.

Misconception 5: “More accounts means more protection”
Holding multiple super accounts may simply mean multiple premiums quietly draining your retirement savings. If you have more than one super account, you may be paying premiums on more than one insurance policy, which reduces your retirement savings. Claim outcomes can vary between policies, and benefits aren’t always cumulative. Consider whether you need more than one policy, or whether you can get cover through one fund.

Misconception 6: “It’s always the cheapest option”
Premiums may be lower because super funds buy cover in bulk, but that doesn’t always translate to the best value. Cover may not be enough, or may change over time, and it also may not be cheaper than insurance you can buy elsewhere.

Where to from here?
Superannuation and insurance can be complex. Before you assume your default cover’s doing the job, speak with your professional adviser to review your policy, premiums and any gaps, so you know exactly what you’re paying for and whether it still fits your circumstances.

The upcoming end of the financial year means it’s time to ensure all your employee payroll and super records are accurate and up to date.

Keeping on top of reporting means you can meet your legal obligations and ensure a smooth year-end for your business and employees.

Here’s a handy checklist for this hectic time of year.

PAYG

Ensure this year’s pay data is cut off after the last pay to be received by staff by 30 June 2026. Check and delete any tax variations ceasing as of 30 June 2026. Enter any new tax variations applying from 1 July 2026.

Revise termination worksheets used for redundancies to the new tax-free limits and employment termination payment (ETP) cap. Take care: if an employee’s terminated by 30 June but paid on or after 1 July, the new rates and thresholds apply.

Review staff who left in 2025–2026, particularly after 31 March 2026, checking whether they’ll have reportable fringe benefits (RFB) for the 2026–2027 income year. If so, you need to maintain their Single Touch Payroll (STP) record and complete the RFB field at next income year-end.

Identify any RFB amounts exceeding the disclosure threshold. Where disclosure applies, consider giving employees a written explanation to minimise queries about income statements.

Check that any staff overpayments are reversed out of wages and coded as loans before finalising in STP. Ensure wages appear in the correct income year. Payments arriving on or after 1 July 2026 should appear in the 2026–2027 income year.

Submit STP annual reporting by selecting the final event indicator to “true” for all staff by 14 July 2026. Review changes to pay rates or salary sacrifice arrangements applying from 1 July. Award rate increases usually apply to the first full pay from 1 July.

Review whether 2026–2027 may result in 53 weekly pays or 27 fortnightly pays, in which case staff can elect to have additional tax withheld. This may also affect super, including salary sacrifices, for staff tracking the concessional limit ($32,500 for 2026–2027).

Update your payroll software for the PAYG withholding tax tables applying from 1 July 2026.

Superannuation

Note that the super guarantee rate remains 12% for the 2026–2027 income year. Ensure reportable employer superannuation contributions appear correctly at the STP reportable employer super contributions (RESC) field.

Check whether the maximum super contribution base applies to high-income employees. For 2026–2027, with payday super, this base becomes an annual figure of $270,830 in qualifying earnings.

Ensure payroll software, clearing house and super payment processes can support payday super from 1 July 2026. From then, you must pay employees’ super guarantee on payday, to be received by their super funds within seven business days, unless an extended timeframe applies.

The April to June 2026 quarter remains in the existing quarterly super system. Make sure June quarter super is paid in time to meet 30 June for tax deductibility and 28 July for super guarantee obligations.

Payroll tax and WorkCover

Review which states and territories staff are employed in and make sure you have the appropriate payroll tax and WorkCover registrations in place.

File a copy of the lodged FBT return to use for payroll tax and WorkCover annual returns. Revenue authorities will usually request it during audits.

Obtain details of any contractor arrangements to be included. Note any changes in required payroll tax and WorkCover declarations for the new financial year.

If the business is part of a group of employers for payroll tax purposes, check if entities have left or joined the group. Review payroll tax office websites and state/territory budget announcements for rebates or incentives available in each jurisdiction.

The end of financial year’s creeping up and it’s a great time to review whether you need to take superannuation action before 30 June 2026. Here are a few moves that could make a meaningful difference.

1. Check your concessional contributions cap

Concessional contributions are generally before-tax contributions, including employer super guarantee and salary sacrifice contributions. They also inc lude personal after-tax contributions claimed as a deduction.

The 2025–2026 general concessional contributions cap is $30,000. This applies across all your super funds combined. If you make concessional contributions exceeding the cap you’ll owe extra tax, so take care with year-end contributions.

If your total super balance on 30 June 2025 was under $500,000, you may be able to carry forward unused concessional contribution cap amounts from the previous five financial years, increasing your 2025–2026 concessional contributions cap.

Maximising personal tax-deductible contributions can be useful if your annual income’s higher than usual (and you could use a bigger deduction), or you need to boost your super.

2. Lodge a notice of intent before claiming personal deductions

If you want to claim a tax deduction for personal super contributions, plan ahead! You need to give your fund a valid notice of intent to claim or vary a deduction and receive the fund’s acknowledgement before claiming in your tax return.

It’s also important to submit your notice to your super fund before rolling over any super, withdrawing super amounts, starting a pension or splitting contributions with your spouse. These can all affect the notice validity and what contributions you can deduct.

3. Make sure contributions reach your fund by 30 June

Don’t assume a super contribution counts as soon as it leaves your bank account. Contributions only count towards a yearly cap when your super fund receives them.

A payment initiated on 30 June may not land in the fund’s account until July, pushing it into next financial year. Allow several business days for processing and check on your fund’s cut-off times.

4. Consider co-contributions and spouse contributions

Eligible low and middle-income earners who make after-tax personal contributions before 30 June may qualify for a government super co-contribution.

The maximum $500 co-contribution’s generally available if you earn under $47,488 in 2025–2026 and contribute $1,000. The co-contribution reduces if you earn more, and you won’t qualify if you earn over $62,488. Any contributions claimed as deductions don’t qualify for co-contributions.

You don’t need to apply separately for a co-contribution. Make sure your super fund has your tax file number, and the ATO will work out the entitlement with your lodged tax return.

You may also be able to claim a tax offset up to $540 if you contribute up to $3,000 to your spouse’s super and their income’s below $37,000. The offset reduces if their income’s between $37,000 and $40,000.

5. Check your minimum pension payments

If you’re retired and drawing an account-based pension, you must withdraw at least the annual mandatory minimum amount as pension income before 30 June, or your pension could lose its tax-free status.

This is important for all types of funds, and particularly if you’re a self-managed super fund (SMSF) member, as you’re personally responsible for your fund’s legal compliance.

If you’ve paused payments, withdrawn non-pension lump sums, or started a pension part-way through the year, confirm you’ve received enough pension income before 30 June to avoid unexpected consequences.

Are you ready?

The best approach to super planning depends on your income, age, super balance, employment circumstances, contributions and retirement plans. Remember, getting professional advice for your situation is always a good idea.

Taking extended leave from work might seem like a straightforward decision, but it could have unexpected consequences for your superannuation insurance coverage that many Australians remain unaware of.

The 16-month rule you need to know:

Since July 2019, superannuation funds have been required to cancel insurance cover for accounts that remain inactive for 16 consecutive months, unless members specifically elect to maintain their coverage. An account becomes inactive when it hasn’t received any amounts – including employer contributions, personal contributions, or rollovers – for 16 consecutive months. The moment a contribution or rollover is received, the 16-month countdown resets.

When this commonly occurs:

Inactive periods leading to cancelled insurance frequently affect people during significant life events, such as: extended parental leave beyond paid entitlements; career breaks or sabbaticals; periods of unemployment or study; and working overseas without Australian superannuation contributions. Many Australians discover their insurance has been cancelled only when they need to make a claim or receive their annual statement.

The notification process:

Your superannuation fund must send insurance inactivity notices before cancelling coverage. These notices are sent when your account has been inactive for 9, 12, and 15 months – essentially giving you warnings at 7 months, 4 months and 1 month before cancellation. However, these notices are only effective if your fund has your current contact details. If you’ve moved house, changed email addresses, or haven’t updated your details, you might miss these critical communications.

How to protect your coverage:

To maintain insurance during periods of account inactivity, you must provide written notice to your fund electing to keep your coverage. This is often called “opting in”. Once you’ve opted in, the election remains valid until you tell your fund you no longer want insurance. Remember, cover can still end for other reasons, including age limits, insufficient balance to pay premiums, policy terms or trust deed requirements, or if you request cancellation. The opt-in process varies between funds, so check your fund’s specific requirements. Some funds accept online elections, while others require signed paper forms.

Additional restrictions on coverage:

Insurance cannot be offered through your super fund in other circumstances, including for: accounts where the balance has never reached $6,000, unless the member elects to have cover; and accounts where the member is aged under 25, unless the member elects to have cover, or is covered by a dangerous occupation exception.

Regular account monitoring:

The Australian Financial Complaints Authority (AFCA) recommends regularly checking your superannuation statements and maintaining current contact details with your fund. This ensures you receive important notices about your account status and insurance coverage. You can monitor your superannuation through ATO online services, which displays all your accounts. The service flags accounts with insurance coverage, but you should check directly with each fund to confirm whether insurance cover applies and whether it may be at risk of cancellation.

What if coverage is cancelled?

If your insurance has already been cancelled due to inactivity, you may be able to apply for new coverage, though this could involve health assessments and waiting periods. Some funds offer reinstatement options for recently cancelled policies.

Take action now:

Review your superannuation accounts to check whether you have insurance coverage and consider whether you need to opt in to maintain it during any planned career breaks. Contact your superannuation fund to update your contact details. If you’re planning extended leave, discuss your options before your account becomes inactive. Consider speaking with a qualified financial adviser to review your superannuation and insurance arrangements, particularly if you’re planning major life changes that could affect your contribution patterns.

Navigating the types and limits of superannuation contributions can feel like decoding a complex puzzle. But understanding the difference between concessional and non-concessional contributions is crucial to maximising your retirement savings while avoiding unnecessary tax penalties.

What are concessional contributions?

Concessional contributions are generally made from your before-tax income and include: employer super guarantee contributions; and salary sacrifice contributions. Concessional contributions also include: after-tax personal contributions you claim as a tax deduction; paid parental leave super contributions; and after-tax contributions from certain third parties to your super fund – including parents and friends, or your spouse who lives separately and apart on a permanent basis. Note that spouse contributions and contributions from parents to children under the age of 18 are not concessional contributions. Concessional contributions are taxed at 15% within the fund (with the tax paid from your contributions), making this an effective way to reduce your overall tax burden while building retirement savings. The annual limit on concessional contributions for 2025–2026 is generally $30,000, depending on your total superannuation balance and other factors.

What are non-concessional contributions?

Non-concessional contributions come from amounts that have already been taxed and don’t attract additional tax unless you exceed the cap. These include: spouse contributions (where your spouse isn’t your employer); contributions for a child under 18 (if the contributor is not the child’s employer); personal contributions from your after-tax salary that you don’t claim as a personal tax deduction; excess concessional contributions not released from your fund; and most transfers from foreign super funds. The annual limit on non-concessional contributions for 2025–2026 is generally $120,000, depending on your total super balance and other factors.

Special exclusions to take into account

Certain contributions don’t count towards your non-concessional cap: contributions of certain CGT exempt sale proceeds from your small business; personal injury payments; downsizer contributions from home sales; government co-contributions; and re-contributions of COVID-19 early release amounts. Apart from government co-contributions, you must specifically request these exclusions using the appropriate forms before or when making contributions.

The importance of contribution caps

Your superannuation enjoys preferential tax treatment, but this comes with limits. If you exceed the annual limits that apply to you, higher tax rates apply to those contributions above your limit. All contributions across multiple funds count towards your caps, so careful tracking is essential. High-income earners earning over $250,000 (including concessional super contributions) may also face an extra 15% tax on some of their concessional contributions.

Key takeaways

Understanding contribution types helps you: maximise tax benefits through strategic contribution timing; avoid excess contribution penalties; plan effectively for retirement; and take advantage of available exemptions and exclusions. Remember that your age, work status and total super balance can also affect contribution eligibility and fund acceptance rules. Strategic planning becomes increasingly important as your circumstances change throughout your working life and as you approach retirement.

Need personalised advice?

Super contribution rules are complex and your circumstances are unique. For detailed guidance on optimising your contribution strategy and understanding how these rules apply to your situation, visit the ATO website and speak with your professional tax adviser.