Warning – Review Your Super Contribution to Avoid Excess Tax Penalties
Concessional superannuation contributions are employer contributions as part of the super guarantee or a salary sacrifice arrangement, or personal contributions for which you claim a tax deduction. There are limits on how much you are able to contribute as a concessional contribution. For this financial year the limits are $25,000 if under age 50 and $50,000 if over age 50. There are heavy tax penalties if you breach these limits.
According to a recent ATO report, the number of people who breached the superannuation contribution limits increased from 15,315 in 2008/2009 to 45,330 in 2009/2010. This was the year that there was a significant reduction in super contribution limits. The reduction in limits obviously caught people unaware. Most who appealed their ATO determination had little success.
In 2012/13 there will be a further reduction in concessional contribution limits for people over 50 from $50,000 to $25,000p.a.. Unfortunately, the proposed relief for people with super balances under $500,000 was not included in the recent federal budget. It is therefore important that you review your current contribution amounts, particularly if you are over age 50, to ensure that you are not one of the people who get caught out.
Common traps include:
- Not reviewing your salary sacrifice arrangements
- Not allowing for pay rises which increase your super guarantee contributions.
- People on high incomes whose 9% super guarantee exceeds the limit.
- The timing of super contributions particularly around the end of the financial year
Be careful, June 30 is on a Saturday this year and late contributions may not be processed by banks/super funds until the following year. Plan ahead and ensure final 2011/12 contributions are processed in plenty of time.
If you have any questions, please do not hesitate to call us on 08 9301 2200, or contact us today.
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