Have you reviewed your super contributions lately?
The concessional superannuation cap for over-50s has halved again to $25,000, effective for this financial year.
Exceeding your contributions cap can be costly
The assessments issued to members of Australian super funds state that the affected fund members are subject to an extra 31.5% on contributions exceeding the concessional contributions cap, taking the total tax take on the excess contributions to 46.5%. From the 2012/2013 year, the concessional cap is $25,000 for all ages. Before the 2012/2013 year there were two aged-based concessional contributions caps: $25,000 for under-50s, and $50,000 for over-50s.
Confusion reigns: what contributions count towards the concessional cap?
What many Australians don’t realize is that an employer’s compulsory Superannuation Guarantee (SG) contributions are counted towards an individual’s concessional contributions cap. Concessional contributions include your employer’s SG contributions, any additional super employer super contributions, and any salary sacrificed contributions that you arrange for your employer to deduct from your before-tax salary.
Ignorance is no excuse
Note that the ATO has publicly stated that ignorance of the law is not compelling enough to show discretion for excess contributions.
Are Concessional Contributions the Only Option?
In a word no! You can also contribute up to $150,000pa to your super as non concessional contributions. You do not receive a tax deduction for these type of contributions, but on the plus side you do not pay the 15% contributions tax. If you wish you can bring 2 years forward and contribute up to $450,000 in any one year, but nothing for the following two years.
If you are in any doubt about your current position in relation to super contribution caps please contact your Smith Wealth adviser as soon as possible. If you leave it until later in the financial year it may be too late to avoid a significant tax bill!