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Reminder of the concessional cap limits for 2009 / 2010
Concessional contributions include all employer contributions, salary sacrifice pre tax and any contributions claimed as a tax deduction.
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Aged under 50 years |
$25,000 | |
Aged over 50 years |
$50,000 |
These limits are per individual so additional care needs to be taken where more than one employer contributes on your behalf. If the above limits are breached then tax of 31.5% is applied to the individual (this can be paid by the individual or super fund), in addition to 15% in the fund (total tax of 46.5%).
Non concessional cap limits for 2009 / 2010
A further problem arises if you also breach your non concessional cap limits. Non concessional contributions are contributions from an individual where no tax deduction is claimed and include after tax salary sacrifice.
|
All ages |
$150,000 | |
Or up to $450,000 over a 3 year period under the bring forward provisions |
Excess non-concessional contributions are taxed at 46.5% to the individual (the notice is sent to the individual but must ultimately be paid by the super fund).
Breach of both cap limits
If both cap limits are breached then total tax of up to 93% can apply on the excess contribution!
What you can do
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Immediately review the amount of contributions that are currently being made to super and contact us urgently if you believe that you will be close to your cap limits.
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If you have a Transition to Retirement Pension you will need to review how the change in cap limits will affect your strategy and contact us immediately to discuss.
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Queensland Government employees can be particularly affected due to the way their contributions are calculated on a formula.
Case Study 1
John and Jane are aged 35 and both work full time. They live off Jane's salary and salary sacrifice part of John's income to super as follows:
|
Employer SGC |
$9,000 | |
Salary sacrifice |
$25,000 | |
Total concessional contributions |
$34,000 | |
Cap limit |
($25,000) | |
Excess contributions |
$9,000 | |
Excess tax payable by John or Super Fund
(@ 31.5%) |
$2,835 |
Changes need to be made to avoid getting an unexpected $2,835 tax bill at the end of the year.
Case Study 2
Amanda is aged 60 and has been salary sacrificing 100% of her salary to super and drawing a pension back out of her super to live on. This strategy has been saving a signficant amount of tax and as a result she has seen her super fund grow over the last few years.
|
Employer SGC |
$5,400 | |
Salary sacrifice (100% of salary) |
$60,000 | |
Total concessional contributions |
$65,400 | |
Cap limit |
($50,000) | |
Excess contributions |
$15,400 | |
Excess tax payable by Amanda (this is payable by Super Fund) (@ 46.5%) |
$7,161 |
Again, changes need to be made to avoid getting an unexpected $7,161 tax bill at the end of the year.
In addition Amanda would also need to adjust the Transition to Retirement Pension.
As you can see this is a serious issue and you may need
to review your super contributions to ensure that you
do not get an unexpected tax bill.
For further information, contact:
 Kylie Wright
Partner
Authorised Representative Number: 245052
 Gemma O'Shanesy Financial Planner
Authorised Representative Number: 304440
 Michael Toohey Financial Planner
Authorised Representative Number: 336737
Financial planning services provided by Professional Investment Services |
Insight 