Watch those concessional contributions

28 Jan 2010

Federal Treasurer Wayne Swan made some changes to superannuation in last year’s Budget that may have escaped your attention at the time. One of those changes related to how much you can contribute to your super account before the current tax concession is removed.

If you’ve been salary sacrificing into your super since last July it’s not a bad idea to check where you’re up to at this point, just to make sure you’re not going to go over the limit.

What are concessional contributions?

Money going into your super is either a ‘concessional’ or a ‘non-concessional’ contribution. If it’s concessional it means you only pay 15% tax, a ‘concession’ to the tax rate you generally pay on most other things, e.g. your salary.

Concessional contributions include the (minimum) 9% compulsory super paid by your employer, as well as any salary sacrifice contributions you might be making. For the 2009/10 financial year the Budget has reduced the annual limit on your concessional contributions by half, down to $25,000 pa¹.

There are, however, transitional rules for people aged 50 or over (or turning 50) between 1 July 2009 until 30 June 2012. The rules allow you to make concessional contributions up to $50,000 pa until this date.

What happens if I’m over?

If you exceed the limit, or cap, for your age group you’ll pay more tax. Contributions in excess of the concessional cap are taxed (currently) at 31.5*%, in addition to the standard 15% contributions tax. This includes the 1.5% Medicare Levy.

Not sure what to do?

If you’d like some assistance with understanding how the new limit may affect you – either for this financial year or for subsequent years – please contact us on 1800 657 872. It’s not just about keeping an eye on your tax; this can also affect your longer term retirement planning.

With only five months left of 2009/2010, now’s a good time to review your position.

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