Last week I was at the SPAA (Self Managed Super Fund Professionals Association of Australia) Conference in Brisbane. I was firstly glad to see the city bouncing back after the floods earlier this year but one plenary session had the Government confirm their announcement for the 2010 – 2011 Budget that they will relax the concessional contribution limits for older Australians who have small account balances. This is still awaiting to become legislated so watch this space!
The full details of this are yet to be confirmed as is how they will value the defined benefit superannuation interests but for people over age 50 that have less than $500,000 in their superannuation savings this change will allow them to continue to put up to $50,000 into superannuation as concessional contributions.
Concessional contributions are any contributions which are paid into your super account that have had a tax deduction claimed on them. This includes your employers Superannuation Guarantee Contributions (SGC) as well as contributions that you are paying in via salary sacrifice and just to add a little more confusion if you are a member of the Commonwealth or Public sector defined benefit schemes this also includes the productive components paid into the fund.
This is a step in the right direction to ensure Australian’s can save for their retirement and boost their superannuation but with the limit on the $500,000 balance this does not seem to go far enough.
It is Your Responsibility to stay within the limits
The Australian Tax Office has put responsibility onto the members of the super fund to make sure you don’t go over the contribution limits.
My advice is to check with your super fund how much has been allocated to your concessional contributions limit now, to ensure that any adjustments to salary packaging can be made to avoid paying excess contributions tax.
What is the excess tax?
| Concessional cap*
(Taxed) |
Transitional concessional cap** | Non-concessional cap
(Non Taxed) |
|
| 2010-11 and 2009-10 financial years | $25,000 | $50,000 | $150,000 |
| Tax on amounts over the cap | 31.5% (in addition to the 15% paid by the super fund) | 31.5% (in addition to the 15% paid by the super fund) | 46.5% |
| Other information | Any concessional contributions in excess of the cap will also count towards your non-concessional contributions cap. | Any concessional contributions in excess of the cap will also count towards your non-concessional contributions cap. | If you are under 65 years old at any time during the financial year, you may be able to bring forward the next two years of contributions, but certain conditions apply. This effectively allows you to contribute up to three times the cap at once, or at any time during the three financial years. |
*The $25,000 concessional cap will be indexed annually from 2010–11 onwards to average weekly ordinary time earnings (AWOTE) and rounded down to the nearest multiple of $5,000.
**The transitional concessional contributions cap is for those who are 50 years old or older on 30 June in a financial year and is available until 30 June 2012 and is not indexed.
If you have a superannuation saving strategy in place make sure you stay with in your contribution limits.
If you need assistance in exploring these further talk to a professional but most importantly start your journey to being free around your money and creating wealth with understanding.
Scott Malcolm (scott@money-mechanics.com.au) is Director of Money Mechanics (ph: 6257 5557) a fee for service advice firm who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.