Concessional Contribution Cap Limits
Over the course of the last week there has been considerable media speculation on what this year's Federal Budget (to be delivered on Tuesday night) will contain.
One of the "hot items" that appears to be gaining some traction relates to the possible halving of the caps relating to concessional (i.e. tax deductible) superannuation contributions. Such a move would see the concessional contribution caps reduce to $25,000 and $50,000 for those aged 50 or over who have access to the higher transitional contribution cap.
The halving of the caps relating to concessional contributions will certainly impact on higher income earners who have been (or plan to) salary sacrifice or contribute large amounts to superannuation. It could also impact on the self employed and substantially self employed who are eligible to claim a tax deduction for personal contributions.
The worst case scenario is that the changes would apply from Budget Night (12th May 2009) while a more logical approach would be to allow the current caps to run until the end of this financial year. Changing the caps part way through a financial year will be problematic and will impose additional reporting obligations on superannuation funds. (1)
However we can't dismiss the possibility of changes applying from Budget Night.
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