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Superannuation

Reduced Concessional Contribution Caps

 In the May 2009 Federal Budget, the government announced a halving in the amount of the concessional contribution caps. Concessional contributions refer to contributions made by both employers (including those made under a salary sacrifice arrangement) and the selfemployed as personal deductible contributions. The new caps, from 1 July 2009, are as follows: 

Age
Concessional
Contribution Cap per
Year from 1 July 2009
Under 50
$25,000
(down from $50,000)
50 years or over (this
Transitional cap applies
Until 30 June 2012, then it
Reverts to $25,000)
$50,000
(down from $100,000)
These caps reduce your ability to salary sacrifice into superannuation and also limit the extent to which selfemployed taxpayers can contribute to super. Despite this, there is no change to the attractiveness of super as a concessionally taxed environment whereby:
• Your contributions are taxed at just 15%;
• Fund earnings are taxed at 15%;
• Earnings used to fund your pension when you retire are tax-free;
• Withdrawals are tax-free after the age of 60;
• Capital gains are taxed at 15% (or 10% if the asset is held for 12 months or more).
This low-tax environment remains; it is just that the reduced caps limit your ability to exploit this environment in so far as salary sacrificing and self-employed contributions are concerned. The halving of the caps does not affect the amount of after-tax, non concessional contributions you can make into super.
Tax practitioners and taxpayers alike should familiarize themselves with the new concessional caps in order to avoid making excess contributions (which can be subject to a penalty tax of 31.5%).

 

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