In last month’s Federal Budget, it was proposed* that contributions caps for concessional contributions will be reduced from 1 July 2009. Contributions made to AvSuper before 30 June 2009 are not affected by these changes.
The reduced caps will affect your concessional contributions and, if legislated, will mean you may be required to pay additional tax on contributions above the caps if the sum of any salary sacrifice amounts and your employer contributions is more than $25,000 p.a. (or $50,000 p.a. if you are over 50).
Even if the new caps apply to you from 1 July, you may not have to make any decisions immediately. We suggest you take time to assess the implications for your own situation, possibly get some professional advice, and then make any necessary adjustments to your contributions (pre or post tax) – remember, the caps refer to how much is contributed to your super account over the entire financial year.
Please note that the Government has not proposed changes to non-concessional contributions (generally those paid to your super from your after tax salary), although when you exceed your concessional cap, excess contributions then count towards your non-concessional limits.
Defined Benefit Member? If you have a defined benefit with AvSuper, the proposed cap reductions are expected to include some grandfathering provisions to protect you from additional tax. In most circumstances, these provisions would mean your notional concessional contributions will be treated as if you have not exceeded the cap as long as your contribution rate to your defined benefit account is not increased after 12 May 2009. However, once you reach the cap, any salary sacrifice contributions you make to an accumulation account may incur additional tax regardless of the grandfathering provisions.
We’ll keep our members informed about the changes as they become law, as well as updating our website, but please contact us if you need assistance.
* The proposed changes have not yet been made law, although it is expected that this will occur soon.