NEW rules for tax contributions are among superannuation changes that will take effect on July 1.
ADF members need to think carefully about how they will be affected by the changes to pre-tax and post-tax contributions.
Pre-tax contributions
From July 1 contributions from pre-tax income will be called concessional contributions.
For Defence members, these will include:
- any salary sacrifice contributions,
- an amount for each member representing their MSBS or DFRDB employer benefit, and
- any non-Defence employer contributions.
Concessional contributions will be taxed as follows:
- They will be taxed at 15 per cent.
- They will be capped at $50,000 a year (this will increase each year by $5000).
- For members aged 50-74, the cap will be $100,000 from 2007/2008 to 2011/2012 only.
- Any concessional contributions over the cap will be taxed at a total of 46.5 per cent.
The changes to concessional contributions will affect ADF members who are thinking about sacrificing salary into super. This is especially important for members who are eligible for a retention or completion bonus and intend to put it into super.
Seeking financial advice before you elect to take a retention bonus or sacrifice salary into super will help you decide how to gain the most from your bonus.
Post-tax contributions
From July 1, contributions from post-tax income will be called non-concessional contributions. Non-concessional contributions will be capped and taxed as follows:
- They will be capped at $150,000 a year. This cap is the total of all non-concessional contributions that you make to all super funds.
- Non-concessional contributions are post-tax. You will not be taxed a second time when you pay them, provided you stay under the cap.
- Any non-concessional contributions over the cap will be taxed at a total of 46.5 per cent. You will have no option but to withdraw an amount from your super fund equal to your tax liability.
- Concessional contributions in excess of $50,000 will count towards the non-concessional cap.
- The cap will apply to all non-concessional contributions made on behalf of an individual. For example, contributions made by one spouse for the benefit of the other will be counted against the receiving spouse’s cap.
- To allow for larger contributions, members aged under 65 will be able to bring forward up to two years of non-concessional contributions. For example, you can contribute up to $450,000 in the 2007-2008 financial year but will not be able to make further non-concessional contributions until the 2010-2011 financial year.
GET MORE INFORMATION
- A list of financial planners is available at Financial Planning Association at www.fpa.asn.au; CPA Australia at www.cpaaustralia.com.au; and Institute of Chartered Accountants in Australia at www.icaa.com.au.
- The official Government website for the super changes is www.simplersuper.treasury.gov.au.
- The Australian Securities and Investment Commission’s Fido website is at www.fido.gov.au. Check out the links to ‘superannuation’ and ‘getting advice’.
- ADF members should contact ComSuper on 1300 001 877 to give their tax file numbers to MSBS or DFRDB.
TAX FILE NUMBER WARNING
- Avoid a nasty surprise and give your Tax File Number to all your super funds. If you don’t provide it, your concessional (pre-tax) funds will be taxed at 46.5 per cent and non-concessional (post-tax) contributions won’t be accepted by your fund at all.
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