Concessional Contribution Cap:
Now $25,000 for all
In the May Federal Budget, the Government deferred its plans to allow taxpayers aged 50 and over to continue to make concessional contributions of up to $50,000 to superannuation, until at least 2014/2015.
From 1 July 2012, all eligible persons have a concessional contribution cap of $25,000.
Your concessional (tax deductible) contribution cap includes all of:
- Compulsory 9% Superannuation Guarantee Contributions (SGC)
- Voluntary Salary Sacrifice contributions
- Personal deductible contributions (if eligible)
Review Salary Sacrifice Agreements now!
If you have a salary sacrifice superannuation contribution arrangement in place with your employer, you should review it now to ensure that your concessional cap will not be exceeded in 2012/2013. It is not up to the employer to monitor your cap, as all contributions are tax deductible. If your cap is exceeded, you are assessed for Excess Contributions Tax (ECT) at 31.5%. With 15% already paid by the receiving superannuation fund, excess concessional contributions are effectively taxed at 46.5%.
According to the ATO, to be an effective salary sacrifice agreement it must be:
- in writing between you and your employer; and
- in place before you perform the work to which the salary relates e.g. 1 July 2012.
30% contributions tax for individuals earning over $300,000
As announced in the Federal Budget and reported in our Budget Tax Bulletin, from 1 July 2012, individuals with "notional assessable income" greater than $300,000 will pay 30% contributions tax on their concessional contributions comprised of:
- 15% contributions tax paid by superannuation funds on taxable contributions; and
- an additional 15%, assessed by the ATO based on a high income earners tax return information, then likely to be levied against their superannuation fund.
In determining your "notional assessable income" of $300,000 the ATO will include the following:
- normal assessable income such as salary, wages, commissions & bonuses;
- investment earnings and capital gains;
- reportable fringe benefits;
- reportable superannuation contributions;
- exclude partnership or gearing losses.
If an individual's income excluding their concessional contributions is less than the $300,000, but the inclusion of their concessional contributions pushes them over the threshold, the reduced tax concession will only apply to that part of the contributions that is in excess of $300,000.
Since these taxpayers will likely be paying the highest marginal rate of personal tax of 46.5%, they will still make a tax saving of up to 15% on concessional superannuation contributions that are subject to this surcharge and effectively taxed at 30%.
Reportable Employer Superannuation Contributions (RESC's)
When preparing your employee's PAYG Payment Summaries for the year ended 30 June 2012, any "salary sacrifice" superannuation contributions made on behalf of an employee, including working directors, must be reported.
Reportable Employer Superannuation Contributions or "RESCs" generally include all superannuation contributions paid by an employer that are in excess of the 9% compulsory Superannuation Guarantee Contribution (SGC) amount.
Salary sacrifice superannuation contributions are those which an employee has negotiated with the employer to be withheld from their gross "pre-tax" salary package and paid to a superannuation fund.
RESC Tips & Traps!
By not reporting RESCs correctly or simply not reporting them at all, the employee may receive or lose Government allowances or rebates, pay incorrect or no child support, be denied personal deductions for superannuation contributions, or not charged the new 30% tax on contributions of high income earners (see separate story). Here are some tips and traps:
- RESCs do not include 9% SGC. Only voluntary salary sacrifice contributions are reported as RESCs on the PAYG Payment Summary
- If an employee or working director sacrificed 100% of their salary as superannuation contributions in 2011/2012 and received no cash salary, then the employer is still required to prepare a PAYG Payment Summary for that employee. Although the salary and wages amount is nil, the RESC amount is still required to be reported and the PAYG Payment Summary included in the employee's personal income tax return.
Reporting RESCs on each PAYG Payment Summary is compulsory for all employers and penalties apply for incorrect reporting or omissions.
SMSF Annual Return levy increased
The ATO has announced an increase to their Self Managed Superannuation Fund (SMSF) supervisory levy from $180 to $200, payable on lodgement of SMSF annual returns for the year ended 30 June 2012 onwards. The ATO deduct this levy from your SMSF's refund or add to it to tax payable by the fund each year, then use the proceeds to fund their audit supervision of SMSFs.
If you have any questions on superannuation matters, please contact Chris Campbell, Clive Todd or your Hanrick Curran Partner, Director or Client Manager. For copies of earlier bulletins on superannuation and related tax matters, visit the Hanrick Curran website at www.hanrickcurran.com.au
This Bulletin contains factual information about superannuation and tax related compliance matters and does not take into account your personal circumstances or eligibility to contribute to superannuation, to claim tax deductions or risk being assessed for excess contributions. The Corporations Act 2001 deems that making, increasing or decreasing superannuation contributions is financial advice. We are not licenced to provide financial advice. Consider seeking advice from a licensed financial adviser.
This article was published in the Winter 2012 Horizon. For a pdf version of the newsletter please click here.