The Rudd government’s changes to the concessional and non – concessional superannuation contributions caps may cause some people who are contributing extra to their super to be hit with excess contributions tax. A recent report in the Financial Review explored this problem and suggested people who have been making additional payments, review their current years contributions to date, and determine if they may be in breach of the legislation.

 

People most at risk are those over the age of 50 who had arranged salary sacrifice of super contributions in prior years based on the old cap of $100,000.These people may be at risk of contributing too much to their super fund this year, and therefore attract the tax penalties up to 93% on the excess contributions.

 

There is also an issue if you have multiple employers as each are required to contribute the 9% SG for you. You will need to include all contributions from each employer to determine whether you have or will breach the cap before June 30 2010.

 

The caps for the 2009/2010 financial year are as follows:

Contribution	Cap	Excess Contributions Tax
Concessional Contribution
Under age 50	$25,000 pa	31.5% on excess contributions + 15% on all contributions
Age 50 - 65	$50,000 pa (until 2011/2012)
Non-Concessional Contributions
Under age 50 age 50 - 65	$150,000 pa, or $450,000 over 3 years	46.5%

If you have any doubts as to whether you may have exceeded your contributions cap for the 2010 financial year, now is the time to find out. If you do exceed the caps, you should contact us immediately to try and remedy the situation for you. Once 30^th June 2010 rolls over, you may be left with a hefty tax bill.

Last week it was announced the long awaited Henry Tax Review report would be released on the 2 May 2010. We will provide feedback on the main points in next month’s newsletter.

With the end of the financial year coming around quickly, we suggest for business clients that they (or LBW) review their results up to the end of March 2010 and determine what their likely tax position is going to be for the 2010 year. This gives us enough time to formulate some plans to minimise this tax burden for clients as much as possible. Please note we usually cannot do anything after 30 June has come around in relation to tax minimization.