If you were thinking of putting more money into your super contributions before the June 30 cut-off this year, you might want to think carefully about your decision. The cut off for the 2010 financial year has been reduced to just $25,000.
The cut-off limit has effectively been cut in half from last financial year, so if you’re under 50 and had planned to put a little extra into your super as a way to help reduce your tax liability, it’s important you’re aware of the limits and caps that have been put in place.
However, if you’re over 50, you’re able to only contribute $50,000 this financial year, instead of the $100,000 that was allowed last financial year – once again a cut of 50%.
Keep in mind that concessional superannuation contributions include the amount paid into your super fund by your employer, which include any amounts paid under salary sacrifice, as well as personal contributions claimed by self-employed people.
While most people might think that this sounds like a lot of money to put into super each year, the truth is the amount paid into your super fund by your employer is counted towards this total figure, as is the amount paid via salary sacrificing.
If you’ve had a pay rise throughout the last financial year, you may be closer to the threshold limit than you think.
For those people who go over the cap or limit amount for their age group, instead of paying 15% tax on your contributions, you’ll be penalised with a tax rate on the excess amount of 31.5%.
These new limits and caps on the superannuation contributions you make mean that as an individual you have the option of working out how much you wish to contribute into your super fun to reap the maximum benefits available for you. At the same time, you’re also able to benefit from the compounding returns over the long term if you’re willing to plan that far in advance.
However, it’s important to be careful about the amounts you wish to contribute without being hit with a higher tax rate on contributions made that are above the allowed super contribution cap limits.