Super industry updates.
While the nuts and bolts of your super account is important, there’s some big picture stuff you should also keep up to date on. You’ll find the basics here.
This is where we give you the legislation low-down (i.e. the impact of legal changes on your super), as well as the Budget breakdown – i.e. how the recent budget affects your super.
Important notice for 2008-09 super co-contribution payments.
Around 200,000 out of a total of 1.3 million of super co-contribution payments have not been
made by the Tax Office to us before the end of the 2008-09 financial year due to problems with
their systems.
The Tax Office will pay interest on the payments that have been delayed at the rate specified
by the Reserve Bank of Australia, which is currently at 3.16%.
If you are an eligible recipient, you do not have to do anything. The Tax Office is working
closely with us on this matter and will clear the backlog of payments, apply interest automatically
and make payments to us.
Interest will continue to be paid until you receive payments or it is paid into the relevant
super fund.
If you are suffering hardship as a result of these delayed payments you should contact the
Tax Office on 1300 139 027 to discuss your circumstances. The Tax Office can only make payments
where you meet the requirements for a direct claim (when you have retired and no longer have a
superannuation account eligible to receive the co-contribution). For more information, refer to
Super co-contributions at
www.ato.gov.au.
Temporary reduction to the Government Co-contribution.
The government co-contribution has been temporarily reduced. Previously non-concessional
contributions of up to $1,000 were matched by the government with a co-contribution of $1,500 for
people earning less than $31,920. The co-contribution was phased out up to an income level of
$61,920.
Over 2009/2010, 2010/2011 and 2011/2012 the con-contribution will reduce to $1,000. It will
increase to $1,250 in 2012/2013 and 2013/2014. It is scheduled to return to the full $1,500 in
2014/15 and future years.
Before-tax super contribution changes.
It used to be a bit of a complex system, 'if you’re X years old you can put $Z in, and if you're Y you can put $ZZ in'. Now it's less complicated and you've got more time to invest. In the 2009/2010 Federal Budget, the government reduced the annual capped amount you can contribute to your super (before-tax). Below are the updated amounts which came into effect on 1st July 2009.
- You can invest up to an annual cap of $25,000 (which is taxed at a flat 15%). And now it's the same rule for all ages (which means people younger than 50 are no longer penalised with a heftier super tax bill than everyone else).
- If you invest more than the annual cap amount, you're taxed an additional 31.5% on that amount, and it counts towards your non-concessional contribution cap.
- You've got five more years to invest in super - 75's now the cut-off age.
- For the over 50s the Better Super transition period is still applicable - where you can double your annual before-tax contributions until 30 June 2012 (i.e. the concessional cap is $50,000 instead of $25,000).
- FYI: Before-tax super investments now go by two different names, depending on who you are. If you're self employed or a person sacrificing part of your salary, it's a 'personal deductible contribution'; for employers it's a 'concessional contribution'.
After-tax super contribution changes.
- The after tax contributions cap will remain at $150,000 per year for 2009/2010 however in the future this cap will be six times the concessional contributions cap and will be indexed accordingly.
- Tax on your non-concessional contributions kicks in once you go past the $150,000 cap, and it's at the highest marginal rate (currently 46.5%).
- If you go over the cap you can ask your fund to release money from your super account to pay it (so it's not an out-of-pocket expense).
- If you have more than $150,000 that you'd like to invest in super in any one year, you’re able
to 'bring forward' two years' worth of contributions. The rules:
- you can invest up to $450,000 over a three-year period
- once you hit $450,000, no more can go in till the three-year period is up
- applies to people younger than 65.
- There are some exclusions to the $150,000 cap, including profits from the sale of a small business and settlements received from serious work-related injuries.
- FYI: After-tax contributions (formerly known as 'undeducted') are now called 'non-concessional'.
[For more insight on the changes please chat with a financial advisor or the Tax Office, or visit the ATO’s Better Super website.]
Why tell us your Tax File Number?
You need to make sure your superannuation fund isn't in the dark about your Tax File Number (TFN). Otherwise you could end up paying three times more tax on your super than everyone else. Here's what the Australian Government says will happen if you keep your TFN hush hush:
- The money employers pop into your super is taxed annually at 46.5% instead of 15%. That's a hefty amount of dollars you may not get to play with when you retire.
- Same goes if you're doing salary sacrifice contributions.
- You won't be able to make any after-tax super contributions.
- If you're eligible for the Australian Government co-contribution scheme, you might not see a cent of it.
- It could get a bit complicated if you're trying to track down lost super or roll over super from one fund to another.
- Your spouse won't be able to put money in your super (or vice versa).
[And the old rule still stands - to avoid paying a higher rate of tax super funds need your TFN before you can take money out.]
Helpful hints.
- Make sure your super fund has your Tax File Number (otherwise, you could be taxed to the max). Virgin Super members please call 1300 652 770 or download our Tax File Number Form.
- If you don't know your TFN, ask the Australian Taxation Office - call 13 28 61 (or talk to the nice HR person at your work).
