Such members may be aiming to maximise their contributions - perhaps in the countdown to their planned retirement date - while being cautious not to overshoot their caps and becoming liable for an unexpected- tax bill.
Astute fund members typically keep a close watch on the annual caps on concessional and non-concessional super contributions - particularly when the caps are about to change or when stepping-up their contributions.
As reported in the Superannuation & Financial Services Bulletin, published in late February by Thomson Reuters, the tax office has announced that for 2014-15:
- The indexed general or standard concessional (before tax) contributions cap will rise by $5,000 to $30,000. This cap - which will apply to members aged under 49 from July - mainly comprises salary-sacrificed, superannuation guarantee and personally-deductible contributions for eligible members. The cap had been frozen for 2012-13 and 2013-14.
- The higher temporary concessional cap applying to older fund members will be $35,000, the same as in 2013-14. However, there is one key change. This special cap will apply to members aged 49 years and older - it had applied only to members age 59 and older in 2013-14.
- The non-concessional (after-tax) contributions cap will rise by $30,000 to $180,000. (It is set at six times the general concessional cap, no matter a member's age.)
Members seeking to really maximise their super contributions should note that non-concessional contributions of up to $540,000 can be made from July under the "bring-forward rule" in superannuation if eligible - up from $450,000 for 2013-14. Under the bring-forward rule, an eligible fund member under 65 can average their annual non-concessional contributions cap over three years.
Thomson Reuters makes the comment: "Importantly, if a bring forward of the cap is triggered in 2013-14, the next two future-year entitlements are not indexed." The beginning of the three-year period under the bring-forward rule is automatically triggered when a non-concessional contribution is above the annual cap in a single financial year.
Excess concessional contributions are taxed at the member's marginal tax rate (taking into account the 15 per cent contributions tax) while excess non-concessional contributions are taxed at 47 per cent (in 2014-15).
Perhaps the bottom-line regarding super contribution caps is to remain ever vigilant to the traps and opportunities.
By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
4th March 2014
12th-May-2014 | 