Un­der­stand­ing con­tri­bu­tions

The Weekly Advertiser Horsham - - News -

We all want to re­tire with as much money as pos­si­ble, but there are lim­its on how much we can con­trib­ute into our su­per­an­nu­a­tion funds, and if we ex­ceed them, it can be painful.

Be­ing aware of what’s counted can make con­tribut­ing to su­per pain-free. These lim­its, known as ‘con­tri­bu­tions caps’, are as fol­lows: tax on the ex­cess con­tri­bu­tions at the tax­payer’s mar­ginal tax rate less a 15 per­cent off­set for the con­tri­bu­tions tax al­ready paid.

• The ex­cess con­ces­sional con­tri­bu­tions are added to non-con­ces­sional con­tri­bu­tions to be counted to­wards those caps.

Fund mem­bers breach­ing the caps will have the op­tion of re­ceiv­ing a re­fund of ex­cess con­tri­bu­tions, which will be taxed as nor­mal in­come. This op­tion will only be avail­able in the first year of breach. For non-con­ces­sional con­tri­bu­tions – • Ex­cess con­ces­sional con­tri­bu­tions are added to non-con­ces­sional con­tri­bu­tions to de­ter­mine if the $100,000 cap has been breached. If it has, the $300,000 three-year cap is trig­gered. This means that no more than $300,000 can be con­trib­uted over the three-year pe­riod from the be­gin­ning of the fi­nan­cial year in which the orig­i­nal con­tri­bu­tions are made.

Con­tri­bu­tions in ex­cess of $300,000 over three years must be with­drawn from the su­per fund and any in­come earned on those con­tri­bu­tions will be taxed as in­come at the tax­payer’s mar­ginal rate of tax.

Be aware that if you are as­sessed to have ex­ceeded your con­tri­bu­tions your as­sess­ment is ac­com­pa­nied by a com­pul­sory re­lease au­thor­ity, which re­quires the fund to re­lease suf­fi­cient money to pay the tax.

Speak to your li­censed fi­nan­cial plan­ner about your su­per­an­nu­a­tion and make sure you are stay­ing within your lim­its.

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