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Superannuation

I want to contribute extra money to my superannuation account and have heard that there are limits to how much I can contribute.

From 1 July 2007 a limit of $150,000 per year was placed on non-concessional contributions which are post-tax amounts that you have not claimed as a tax deduction. This cap amount may be indexed annually but is still unchanged for the 2012-13 income year.  If you contribute more than the cap amount you will be taxed at the highest marginal rate plus Medicare (46.5%) on those excess contributions. There are transitional rules that apply to taxpayers who are nearing retirement.

I have been thinking about salary sacrificing money into my superannuation account? Is there a limit to how much I can sacrifice?

Amounts paid into superannuation by your employer to meet the Superannuation Guarantee obligations and amounts paid under a salary sacrifice arrangement are called concessional contributions.  From 1 July 2007 total annual concessional contributions have been capped to an upper limit.  

If annual contributions exceed the applicable cap amount, the excess will be taxed at the highest marginal rate, plus Medicare.

For the 2012-13 and 2013-14 financial years, the cap for all individuals is $25,000 (the general cap) – including those aged from 50 to 74 years of age who have had a higher limit in past years.  For the 2014-15 financial year and later financial years, the cap will be indexed annually based on movements in full-time adult average weekly ordinary time earnings (AWOTE) published by the Australian Statistician for the December quarter, rounded down to the nearest multiple of $5,000. 

Recent legislation introduced a temporary higher cap of $35,000 for the 2013-14 financial year for individuals aged 60 years and over, and $35,000 for the 2014-15 financial year and later financial years for individuals aged 50 years and over.  The higher cap will cease when the general concessional cap reaches $35,000 by way of indexation.

I have heard that salary sacrificed superannuation contribution will now be reported on my PAYG Payment Summary? What implication will there be for me?

Since 1 July 2009 all contributions made to a superannuation fund under a salary sacrifice arrangement have been included in the reportable employer superannuation contributions amount shown on your PAYG payment summary.  Also included are any superannuation contributions for which a tax deduction has been claimed.  This means that any entitlement you have to any benefits from Centrelink or the Family Assistance Office, that are subject to an income test, will take into account those amounts.  It also contributes to the calculation of any Child Support payments and is used to determine your liability to such things as the Medicare levy surcharge or repayments of HECS-HELP debts.  They may also impact on any tax offsets that you are entitled to claim on your tax return.

I am over 60 years of age and retired. Will my superannuation pension be tax free in future?

People who have reached 60 no longer pay tax on superannuation income streams (pensions or annuities) that are paid from a taxed fund.  A taxed fund is one where contributions tax was paid on the contributions made by your employer into your super fund on your behalf.  Contributions tax would also have been paid for contributions made under a salary sacrifice arrangement.  Most funds are taxed funds.  However, for taxpayers who belonged to an untaxed super fund, they will still have to pay tax on their superannuation income stream, irrespective of their age.

Taxpayers who are over 60 years of age (for the full financial year) and receiving a superannuation income stream from a taxed fund no longer receive a PAYG Payment summary.

I pay extra contributions to my superannuation fund. Can I claim this on my tax return?

Employee taxpayers whose employer is required to contribute to superannuation are not eligible to claim a tax deduction.  Instead the government may make a co-contribution to their fund.  From 1 July 2012, if your total income for the year does not exceed $31,920.00 a year, the Government will match your eligible superannuation contributions by 50 cents per dollar up to a maximum of $500 pa. 

The superannuation co-contribution will phase down for eligible individuals with total income between the lower and higher income thresholds.  The superannuation co-contribution will be tapered by a rate of 3.333 cents for each dollar of total income for the year that exceeds the lower income threshold.

The superannuation co-contribution ceases once the upper threshold is reached.  The upper threshold is $15,000 above the lower threshold making it $46,920 for the 2012-13 year.  The lower income threshold has been frozen since 2010 but indexation will be resumed for the 2013-14 year.

Your income for calculating the superannuation co-contribution is made up of assessable income plus Reportable Fringe Benefits and Reportable Employer Super Contributions reduced by eligible deductions (if any) from carrying on a business. 

You must also have earned 10 per cent or more of your total income from running a business, self-employed or from eligible employment or a combination of both.   You must be under 71 years old at the end of that tax year and, for people aged between 65-70,  there is an additional work test rule, where you must have worked at least 40 hours in a period of not more than 30 consecutive days in the financial year. 

Contributions made through salary sacrifice or by another person on your behalf will not be counted for the purposes of calculating the co-contribution. If you are self employed you may be able to claim a deduction for your contributions.

How do I apply for the government co-contribution?

If you are entitled to a co-contribution the payment will be made to your fund after you have completed the relevant details on your tax return and lodged it and your fund has reported your contributions to the government.

Your superannuation fund or RSA provider will notify you of the amount of Super Co-contribution received on your annual membership statement for the financial year in which the Super Co-contribution was received.  The ATO will also provide you with a notice at the time the Super Co-contribution is paid and accepted by your superannuation fund or RSA.

Why am I being asked to tell my superannuation fund what my tax file number (TFN) is?

If you do not tell your superannuation fund what your TFN is then the fund will be required to pay additional tax on any contributions made by your employer (including salary sacrifice amounts). Without having your TFN recorded, your fund will not be able to accept any personal contributions that you make and the government co-contribution that you may be entitled to cannot be paid into your account.