Post-budget changes to super

I heard that in the budget there have been more changes to super...can you summarise some of them for me? I am worried that the government keeps changing the rules. I am a 52-year-old truck driver and over the plast few years have been putting money into super and claiming a tax deduction. Gary, Mulgoa.

Yes there have been some changes to the rules. As you are claiming a tax deduction for your super contributions, I assume you are self-employed. If you are a sole trader (or in partnership) you can claim a tax deduction for contributions of up to $50,000 this year (as you are over age 50).

On budget night the treasurer announced that this limit will reduce to $25,000 from 1st July. So make sure that from next year you do not exceed this amount as penalty tax rates will apply. $2,083 per month will get you just under the limit.

Other readers should note that these limits apply to any contributions that your employer is making for you (before tax). That is, for those under age 50, $25,000 now and next financial year and for those over 50, $50,000 this year and $25,000 from 1st July. This includes your 9% employer contribution and any salary sacrifice that you make. These are called Concessional contributions and get taxed at 15% as they go into super.

I don’t agree with the changes but the government has chosen to do this as they want to balance their budget. These changes make it even more important for people to start their retirement planning early.

The other limits on personal contributions (called non-concessional) have not changed. You can still contribute up to $150,000 per year of your own money and these contributions do not get taxed as they go into super. You can also bring forward the next 2 years worth to contribute $450,000 in one year when you are under 65 years old.

So if you win the lottery (or sell a property – or receive an inheritance) we can help you contribute large amounts to super over fairly short periods. And why not! Remember, when you are over 60, superannuation is basically a tax tax on earnings (when you are drawing a pension), zero capital gains tax (great if you sell a property in your Self Managed Super Fund) and zero tax on incomes and lump sums taken from your super money.

I believe that both sides of politics will continue to encourage people to save for their own retirement and expect that there will be many changes to tax rules outside super rather than big changes to super itself.

Another change that may not affect you is that higher income earners will be taxed at more than 15% on contributions. This used to happen in the past but for many years, concessional contributions have been taxed at 15% for all income earners. The limit announced the other night was $300,000. So for those whose income in a tax year is over $300,000 the contributions tax will be 30% rather than 15% from 1 July 2012. Whilst this is annoying for higher income earners, it is still tax effective compared to taking that money as income and being hit with the top tax rate of 46.5% (including Medicare levy).

Lower income earners will start to benefit from the previously announced Superannuation Low income earners Government Contribution which effectively reduced the 15% contributions tax to zero for those earning under $37,000.

So overall, superannuation is still a very tax effective way to save for your retirement (or even transition to retirement). recommend that you get professional advice to make sure you optimise your contributions for your particular situation.


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