As it is getting towards the end of the financial year it is timely for superannuation fund members to review their contributions for the 2012 financial year.
Incredibly, in 2011 over 45,000 taxpayers put too much money into their superannuation resulting in most of these being taxed at penalty rates for putting too much aside in concessional or pre-taxed contributions.
Most people understand the concept of “salary sacrificing” but, as with many good ideas, government has made the salary sacrificing concept more complicated and certainly more confusing with age factors, budget cutting and similar considerations.
Things will only get even more so in the 2013 tax year!
When reviewing your concessional contributions and any salary sacrificing do not forget that these will include both an employer’s compulsory superannuation contributions as well as any pre-tax extra contributions you may make. It is easy to lose track of the total contributions! As well, excess contributions are calculated according to when the money is deposited into the super fund, rather than when the fund member becomes entitled to it.
At its simplest, the result is a Tax Assessment at 46.5% on the excess contributions which is often more than the member’s marginal tax rate – it gets much worse if a taxpayer is wishing to further boost their super by making after-tax contributions as well. Penalty rates of up to 93% can apply!
Whilst the government is looking at the excess benefits problem it is unlikely that this will be sorted out any time soon…so beware!
Please contact Chris McClure at Atkinson Vinden if you have any questions or concerns on this important issue.