News
22.01.14

SUPERANNAUTION CONCESSIONAL CONTRIBUTION CAP – TEMPORARILY INCREASED TO $35,000 FOR SOME

Sadly our legislators just don't get the importance of saving for our retirement, for a brief moment in 2007 -2009, they encouraged us to save and the superannuation concessional contributions cap was raised to $50,000 regardless of age. Most Members receive 14.5% employer superannuation contribution, therefore Members could earn up to $344,827, before they had a problem with the ATO. The concessional contributions cap was then reduced to $25,000, therefore based on 14.5% employer superannuation contribution, the concessional contribution cap will be exceeded on any earnings over $172,413.79.

Despite, section 960-285 of the Income Tax Assessment Act 1997 (ITAA 1997), which requires that the concessional contributions cap to be indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000 (rounded down). The ATO advises that "the indexation of the general concessional contributions cap has been paused at $25,000 up to and including the 2013-14 year. Normal indexation resumes for the 2014-15 year".

There is some good news about getting old, [and there is an argument that it is age discrimination] according to the ATO "people aged 59 years or over on 30 June 2013, and 49 years or over on 30 June 2014 have had the concessional contributions cap temporarily increased to $35,000 for the:

  • 2013-14 financial year if you are aged 59 years or over on 30 June 2013
  • 2014-15 financial year or a later financial year if you are aged 49 years or over on the last day of the previous financial year.

The temporary higher cap is not indexed and will cease when the general concessional contributions cap is indexed to $35,000".

This is a far cry from the halcyon days, when the concessional contributions cap for people who were aged 50 years or over was:

  • $100,000 for the 2007-08 and 2008-09 financial years.
  • $50,000 for the 2009-10, 2010-11 and 2011-12 financial years.

In response to these legislative changes, the AMOU is seeking to ensure that all Agreements have a clause to the effect of:

In the case of employees who are members of an Accumulation Superannuation Fund, where an employee's combined employer and employee salary sacrifice contributions exceed or are likely to exceed the maximum amount that is treated favourably for taxation purposes (Concessional or Transitional Concessional Cap) in any one year, the employer will on written request of the employee reduce the Employer contribution (to that of no less than the SGL) and increase the employee's salary by the corresponding percentage.   

This article gives information of a general nature and Members should seek their own financial advice on how this information may apply to their circumstances.