The legislation regarding superannuation contributions has continually evolved over recent times. As a result business practices need to continually adapt to ensure compliance and those saving for retirement need to pay close attention to the detail to to avoid costly, inadvertent breaches of contribution caps.
Some of the major changes affecting both business and superannuation fund members are highlighted below.
1. Director personal liability for unpaid Superannuation Guarantee
Where a company has not paid its Superannuation Guarantee obligations within 3 months of the due date (due dates being 28 days after the end of each quarter) the Directors’ now become automatically personally liable for the debt and this personal liability can not be avoided through the liquidation of the company.
2. Superannuation Guarantee increase and abolition of age limit
For the 2013/14 tax year the superannuation guarantee levy is 9.25% before jumping to 9.5% from July 1, 2014. The superannuation guarantee age limit has also been abolished from July 1, 2013 so employers need to ensure that all their employees receive superannuation contributions by the due dates irrespective of their age. Further it is prudent to continually review employee contributions to ensure that concessional contributions caps are not breached by employees making additional salary sacrificed contributions.
3. Increased Concessional Contributions Cap
From July 1, 2013 superannuants 60 years or older have been given a welcome increase in their concessional contributions cap to $35,000 up from the $25,000 cap for all other superannuants. This is a temporary measure for the 2013/14 financial year to be replaced with a cap of $35,000 for superannuants aged 50 and over for the 2014/15 financial year. Superannuation fund members in their final years of work should consider taking advantage of these new higher contributions caps to maximise their superannuation balances and claim maximum allowable deductions for their superannuation savings. The Non-Concessional (non-tax deductible) contributions cap remains at $150,000 for all members irrespective of their age.
4. Increased Contributions Tax for High Income earners
From July 1, 2012 taxpayers with adjusted taxable incomes of greater than $300,000 will have their superannuation contributions taxed at 30% instead of the standard 15% usually applied to concessional contributions. Adjusted taxable income is the taxpayers’ taxable income plus their reportable concessional contributions plus any losses from negatively geared investments plus their reportable Fringe Benefits amount. The amount of the super contributions that cause the adjusted taxable income to be over $300,000 will be taxed at an additional 15%. This additional tax will be levied upon the taxpayer personally once they and their superannuation fund have lodged income tax returns for the financial year.
Taxpayers have three options with regards to making payment for the extra liability.
i. Pay the extra tax from their own funds and recover the money from their superannuation fund by forwarding a release authority to their fund within 120 days of making the payment;
ii. Pay the extra tax from their funds and don’t recover the money from their superannuation fund. Note that payment of this liability by members personally without recovering the funds will NOT be deemed a contribution; or
iii. Don’t pay the extra tax from personal funds and instead forward a release authority to their superannuation fund within 120 days requesting payment of the tax directly to the ATO.
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