Beware the taxman

Mike Fitzsimons

Superannuation fund members may inadvertently exceed the concessional contributions cap and be charged a tax rate as high as 93 per cent, according to Plum Financial Services.

Plum managing director Mike Fitzsimons said the company realised that under the new ‘better super’ changes there are many circumstances where members might unknowingly exceed the concessional contributions cap.

This can occur because contributions above the cap attract an additional 31.5 per cent tax, resulting in a total tax payable of 46.5 per cent.

“For members, it is hard to be across all of the new legislative changes to super,” Fitzsimons said.

“There are a number of different factors that come into play when calculating the cap, such as insurance premiums paid on behalf of members by employers. Most members would not connect subsidised insurance to the cap.”

To ensure its members do not suffer such an inconvenience, Plum has implemented a two-tiered awareness campaign that initially targets all members generally and then follows up with those members who are more likely to inadvertently exceed the cap.

“The additional tax for exceeding the cap can put quite a dent in the amount a member is contributing to their super. We think it is vital that super funds do their utmost to ensure members not only fully understand the implications of exceeding the cap, but have the best chance of avoiding doing so should they wish to,” he said.