MLC warns of another potential spike in cap breaches
Although recent Australian Taxation Office (ATO) figures show there has been a significant drop in the number of concessional contribution cap breaches, another spike could be on the cards when the second halving of the caps takes effect if investors aren't careful.
That is the warning from MLC, with head of technical services Gemma Dale cautioning Australians not to get complacent.
Although the yet-to-be-finalised 2010/11 figures suggest a 37 per cent drop from almost 50,000 breaches to just over 30,000, the number of breaches more than tripled from 2008/9 to 2009/10 when the concessional contribution caps were halved from $100,000 to $50,000.
With the cap now having halved again to $25,000, this could lead to another big spike in breaches in 2012-13, Dale warned.
"These latest figures suggest investors are seeking the right advice and getting more familiar with the cap rules," she said.
But Dale said it would appear that many people simply weren't aware of the cap changes, or didn't do a good job tracking their contributions when the caps were halved the first time.
"The cap rules are extremely complex and the reasons for breaches are numerous," she said.
Often once the cap has been breached the ATO has limited discretion to change its assessments, and a tax penalty of 31.5 per cent (in some cases higher) is payable, MLC stated.
MLC said the recently launched 2012/13 version of its online contribution cap calculator can help advisers manage the cap for clients.
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