Super contributions breaches set to increase
The number of people who will have exceeded their superannuation contributions cap in the 2009-10 financial year is likely to increase as the concessional contributions caps are half that of the previous year.
Andrew Yee of HLB Mann Judd Sydney wrote in the group’s newsletter that the Australian Taxation Office (ATO) had notified about 24,000 people for having exceeded their contributions cap in the 2007-08 financial year, yet he believes that number will grow.
Super contributions caps are the maximum amounts a person, depending on age, can contribute to their super every year, and any excess concessional (deductible) contributions are levied with an additional penalty tax at 31.5 per cent on top of the standard 15 per cent tax on superannuation, while excess non-concessional contributions are taxed at 46.5 per cent.
Yee pointed out that non-concessional contributions include excess concessional contributions, and therefore if a person has exceeded both their concessional and non-concessional contributions cap, the excess contributions could be taxed at 93 per cent.
Yee highlighted that the common reasons why people breach the contributions caps include employees directing their employer to make a one-off employer super contribution at year end based on their maximum concessional cap, without taking into account the compulsory 9 per cent super guarantee payments their employer has already paid that year.
Other traps people often fall into are not updating current year salary sacrifice arrangements to reflect the latest lower concessional contributions cap; maximising personal non-concessional and concessional contributions for the year only to realise that the personal concessional contribution amount is limited by income; and those over 65 at the start of the year making a non-concessional contribution of $450,000 for the year not realising that being over 64 they are not eligible for the bring-forward rule.
The ATO can only disregard excess contributions or reallocate them to the next year in special circumstances. So while a super fund that has identified excess contributions can return them within 30 days, “prevention is better than cure”, Yee said.
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